Big Banks Pass Fed ‘Stress Test’, Financial Sector Finishes Higher

Big Banks Pass Fed ‘Stress Test’, Financial Sector Finishes Higher

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.

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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