Bank Stock Roundup: Fed Pauses Rate Hike, JPMorgan & Wells Fargo In Focus
Zacks Investment Research | Mar 21, 2019 10:40PM ET
Over the last five trading days, performance of bank stocks was unimpressive as a number of issues including decline in Treasury yields on increasing fears of economic slowdown and the Federal Reserve's dovish monetary policy stance shook the markets. The issues resulted in negative investor sentiments, leading to a slide in banking stocks.
Major banks’ performance was dismal on the Federal Reserve’s decision of no more hikes in 2019 along with lower expectations for GDP growth and inflation despite strong labor market. Moreover, the Fed unveiled its plan of ending the monthly reduction of its balance sheet.
Notably, the Fed’s decision resulted in the benchmark 10-year Treasury yield hitting its 14-month low of 2.451%. Decline in treasury yields hurt banks’ profitability as a narrower spread between long-term and short term rates hampers net interest margin growth. Further, mortgage rates fell sharply to a one-year low of 4.34% after the Fed’s announcement of resuming the bond-buying business, which could even lower the rates going forward.
Regarding company-specific news related to banks, restructuring and streamlining initiatives continued. In addition, resolution of probes and lawsuits related to legacy matters persisted.
(Read: Zacks Investment Research
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