Bank Stocks Take a Beating
May 13 2019 - 2:06PM
Dow Jones News
By Jessica Menton
Bank stocks slumped Monday after an escalation in U.S.-China
trade tensions and a drop in bond yields revived worries over U.S.
economic growth.
Investors monitor financial shares because bank stocks are
perceived to reflect the health of the broader U.S. economy. The
renewed fears hit everything from large to small lenders.
The KBW Nasdaq Bank Index of large commercial lenders shed 2.4%
on Monday on pace for its biggest one-day percentage loss since
March 22. The index is 13% below its 52-week high from last August,
but still well above its December nadir and is up 12% year to
date.
Shares of Goldman Sachs Group Inc., Citigroup Inc., Morgan
Stanley and Bank of America Corp. all fell at least 3.5%. JPMorgan
Chase & Co. lost 2.6%. Wells Fargo's stock, which declined
1.1%, is now up just 1% in 2019.
Meanwhile, the KBW Nasdaq Regional Banking index of small banks
fell 2.5% Monday. The decline in regional-bank stocks signaled that
investors were worried that tepid global growth and low yields
would threaten to crimp profit margins, some analysts said.
Although many bank stocks have slid in recent weeks, many are
still higher for the year. Shares of Citigroup, Bank of America and
Goldman Sachs are each up at least 15% in 2019, outpacing the
S&P 500's 12% rise.
A further decline in bank shares could signal that investors'
outlook for global growth is dimming, said R.J. Grant, director of
equity trading at KBW Inc.
"Bank stocks are generally a way that investors express their
view on the health of the economy," Mr. Grant said. "We've had a
pretty big rally this year in those shares, but now that tensions
are dialed up, everyone is worried about global growth and how that
will affect all banks."
Anxiety over sluggish economic activity has raised worries about
demand for bank loans for industries that power the U.S. economy,
including the housing and auto markets.
Bond yields also fell sharply, raising warning signs about
global growth. A drop in bond yields, especially for longer-dated
debt, tends to hurt bank stocks because their profit margins tend
to expand when there is a bigger difference between short-term
deposit costs and longer-term lending rates. Investors have
increased bets that the Federal Reserve will cut rates this year,
which would threaten margins.
The yield on the benchmark 10-year Treasury note, a barometer
that influences borrowing costs for consumers, corporations and
state and local governments, fell to 2.393% compared with 2.455%
Friday, falling below 2.400% for the first time since March,
according to Tradeweb.
Write to Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
May 13, 2019 14:51 ET (18:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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