Big Banks Pass Fed ‘Stress Test’, Financial Sector Finishes Higher
$DIA, $SPY, $QQQ, $RUTX, $VXX
Shares in the biggest US banks rose Friday after the Fed completed its annual stress test giving financial institutions the go-ahead for plans to return capital to investors through dividends and buybacks.
The S&P 500 bank sector index was last up 1.9% after touching its highest level in a week.
Wells Fargo & Co. (NYSE:WFC) led with a 5.1% gainer, and most of the index’s other banks rose more than 1%.
Deutsche Bank AG’s (NYSE:DB) US subsidiary was the only bank to fail due to “widespread and critical deficiencies” in its capital planning controls.
The Fed also placed conditions on 3 banks that passed the test.
Goldman Sachs Group Inc. (NYSE;GS) and Morgan Stanley (NYSE:MS) cannot increase capital distributions and State Street Corp (NYSE:STT) must improve its counterparty risk management and analysis, the Fed said.
The Fed’s results were positive for stocks in the sector, which has been pressured recently by concerns about a flattening yield curve.
Overall things look OK. The big winner is probably Wells Fargo because there was a little concern about them going into CCAR. They also had a good size capital return,” said a sector analyst
The test results are “not really huge needle movers for estimates overall. At best you’re up a couple of percent in annual estimates but nothing to move the group significantly,” he said.
Friday, the major US stock market indexes finished at: DJIA +55.36 at 24271.41, NAS Comp +6.62 at 7510.33, S&P 500 +2.06 at 2718.11
Volume: Trade on the NYSE came in at 893-M/shares exchanged
- NAS Comp +8.8% YTD
- Russell 2000 +7.0% YTD
- S&P 500 +1.7% YTD
- DJIA -1.8% YTD
HefFX-LTN’s Technical outlook for the major US stock market indexes is Neutral to Bullish.
Have a terrific weekend.