Magazine article American Banker

Financial Stocks Battered, Margin Compression Seen

Magazine article American Banker

Financial Stocks Battered, Margin Compression Seen

Article excerpt

The financial sector was still looking battered Thursday after a week of heavy losses on the back of unfriendly economic data.

Waning consumer confidence coupled with rising consumer and producer price indexes have sent shock waves through the markets and hammered financial stocks all week.

By Wednesday, the American Banker index of 225 banks had tallied losses of 6.79% in four trading days, and its index of the top 50 banks was down 5.66%. And on Thursday bank stocks were in a hole once more, despite a midsession rebound in an absence of negative data and on speculation about another interest rate cut before the March 20 meeting of the Federal Open Market Committee.

"This week was the worst since October," said Adam Lewis, a trader at Keefe, Bruyette & Woods. He added investors are counting too much on a bailout from the Fed -- they "need a rate cut like junkies need a fix."

Mr. Lewis said he expects stocks to remain sensitive to economic data for the next couple of weeks.

On Thursday the American Banker 225-bank index lost 0.9% and its top-50 index 0.15%. The Nasdaq composite, falling to its lowest level in two years during the day, closed down 1.07%, and the Standard & Poor's 500 index fell 0.2%.

Names like Citigroup, which should have provided a save haven for jittery investors, have been hit hard in recent weeks, Mr. Lewis observed. Citi has lost 13.7% since Feb. 5. And on Thursday, the banking company traded as low as $46.66 but ended the day up 30 cents, or 0. …

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