Bank Stocks Run Out Of Steam

Financial stocks declined in trading on Thursday (Jan. 5), taking a break from a run-up ever since Donald Trump won the U.S. election, after the 10-year yield fell seven basis points to 2.37 percent.

According to a report in Seeking Alpha, the 10-year yield was 2.6 percent two weeks ago. Among the financial stock decliners Thursday were Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, Morgan Stanley, Regions Financial, U.S. Bancorp, KeyCorp and Fifth Third. Also potentially weighing on financial stocks was the ADP payroll report, which showed that 153,000 people in the U.S. landed private-sector jobs in December. That was lower than the 170,000 jobs economists were looking for. There’s also talk in the markets that financial stocks are feeling the pain as investors come to the realization that rates have topped out at least in the near term.

Ever since Trump won the election, investors in bank stocks have had a lot to cheer about, sending most of them surging. That euphoria isn’t expected to be short-lived, even if they were lower Thursday, with Reuters recently reporting the rally in December is just a little taste of what is to come. According to Reuters, shares of bank stocks should continue to climb as investors bet the banks will benefit not only from rising interest rates but also from a regulatory body under President-elect Trump that is less stringent than that under President Obama. Investors think Trump will maintain his promises he made on the campaign trail, including reviewing the number of regulations that have been placed on banks since the financial crisis of 2008. Trump seems to be doing so, noting on his transition website that regulations have hurt the economy, not helped it.

“Following the financial crisis, Congress enacted the Dodd-Frank Act, a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies. The proponents of Dodd-Frank promised that it would lift our economy,” says the Trump transition website. “The Dodd-Frank economy does not work for working people. Bureaucratic red tape and Washington mandates are not the answer. The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”