Today, 11:37 AM
- The S&P 500 is lower by 0.65%, but the XLF is down nearly double that amount, with Deutsche Bank lower by 7% on capital worries and interest rates sliding to a three-week low.
- At 1.59% on the 10-year Treasury, the yield curve in the space of a few sessions has erased all of its post-Labor Day steepening, and yield-starved players are in retreat.
- Regions Financial (RF -1.9%), KeyCorp (KEY -1.7%), SunTrust (STI -1.9%), Fifth Third (FITB -1.6%), MetLife (MET -1.6%), Lincoln National (LNC -1.3%).
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Fri, Sep. 23, 12:05 PM
- The proposed rule would make it more difficult for banks to be involved with physical commodities by raising capital requirements. Further, banks would be prohibited from activities involving power plants, and owning or storing copper.
- The Fed today begins a 90-day period of accepting public comment.
- Banks like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) have relied on grandfather clauses to engage in physical commodity businesses not allowed for other lenders, while Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM) remain somewhat involved in commodity trading and energy tolling activities.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Thu, Sep. 22, 12:17 PM
- U.S. equity capital markets volume of $158.6B through Sept. 19 is down from $236.6B in the same period one year ago, and the weakest in more than 20 years, according to Dealogic.
- It's led to a commensurate drop in equity capital market fees - just $3.7B this year vs. more than $7B in 2015. Another gauge is equity capital market fees as a percent of U.S. investment-banking revenue, and that's dropped to 15.4% from more than 20% last year.
- The main reason, writes Maureen Farrell, is cheap capital. Barely visible interest rates and a thirst for yield mean companies have a variety of options beyond an IPO to raise capital. Just 68 companies have gone public in the U.S. this year vs. 138 through the same period last year.
- That decline is especially painful for banks as IPO underwriting is the highest-margin product in their equity operation.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, KCE, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Fri, Sep. 16, 3:18 PM
- SPDR S&P Global Dividend ETF (NYSEARCA:WDIV) - $0.6195. 30-Day Sec yield of 3.92%.
- SPDR MSCI International Real Estate Currency Hedged ETF (NYSEARCA:HREX) - $0.0874. 30-Day Sec yield of 2.72%.
- SPDR S&P International Dividend Currency Hedged ETF (NYSEARCA:HDWX) - $0.4667. 30-Day Sec yield of 4.76%.
- Materials Select Sector SPDR ETF (NYSEARCA:XLB) - $0.2422. 30-Day Sec yield of 2.01%.
- Energy Select Sector SPDR ETF (NYSEARCA:XLE) - $0.4105. 30-Day Sec yield of 2.69%.
- Financial Select Sector SPDR ETF (NYSEARCA:XLF) - $0.1144. 30-Day Sec yield of 2.01%.
- Industrial Select Sector SPDR ETF (NYSEARCA:XLI) - $0.3115. 30-Day Sec yield of 2.19%.
- Technology Select Sector SPDR ETF (NYSEARCA:XLK) - $0.1956. 30-Day Sec yield of 1.67%.
- Payable Sept. 26; for shareholders of record Sept. 20; ex-div Sept. 16. 30-Day SEC yield as of 9/15/2016
Wed, Sep. 14, 8:29 AM
- Despite slashing billions in costs and pulling back from what were once key businesses since the financial crisis, banks haven't done enough, says a new report from McKinsey and Co.
- "The inescapable reality is that the industry’s restructuring efforts to date have failed to produce sustainable performance ... A more fundamental change is required, based on the realization that for most banks, the traditional model of global capital markets and investment banking is no longer an option."
- The top 10 global banks produced just 7% ROE in 2015. Capital market and investment banking revenue have declined 10% since 2012 to $144B as the big players have lost market share to regional and local banks, where revenue has gone up 14% over that same time frame.
- McKinsey's suggestions for better returns: Sell products individually instead of bundled; better allocation of balance sheets; utilizing digital technology and robotics; participating in industry utilities to cut costs; addressing risk and conduct among bank employees.
- The report takes note of industries like telecom, semiconductors, and autos that have restructured their way to better profits.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IAI, IYG, FNCL, SEF, FXO, RYF, KCE, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Fri, Sep. 9, 10:53 AM
- "War is over," declared Bank of America CEO Brian Moynihan yesterday. "Nothing is over till we decide it is," say regulators.
- Declining to talk specifics about Wells Fargo's transgressions, Fed Governor Daniel Tarullo nevertheless tells CNBC bank behavior hasn't "changed enough" since the financial crisis.
- Lenders are only being reactive to ethical lapses instead of putting compliance programs in place to ensure they don't happen in the first place. He suggests holding individuals responsible for inappropriate behavior would work better than simply lobbing down fines on the banks.
- Bank officers, he says, should be criminally pursued, if necessary.
- Previously: Wells Fargo penalty a warning for entire industry (Sept. 9)
Thu, Sep. 1, 11:58 AM
- After topping $50 per barrel in mid-August, black gold (NYSEARCA:USO) - down another 2.7% today - has retreated all the way back to $43.51 per barrel. It's hitting the XLE, which is off another 1% today, but that's not the worst S&P 500 performer.
- The top sector in August on hopes higher rates were finally on the way, the financials (XLF -1.1%) are off to a weak start this month. Today's focus in the ISM Manufacturing report which unexpectedly tumbled into contraction territory. It may have helped dash any thought of a September rate hike and it's sent the 10-year Treasury yield down two basis points to 1.56%.
- The main event comes tomorrow morning with August's jobs report.
- The S&P 500 and Dow are down 0.5% today, and the Nasdaq 0.25%.
Thu, Sep. 1, 8:00 AM
- Everybody's talking about the banks after the financial sector led the market in August. Most say the rally in this yield-starved group is portending an imminent Fed rate hike (or perhaps a series of them).
- The financial sector rose 3.6% in August vs. a flat performance for the broader market.
- That rally, however, occurred amid a flattening yield curve, and the spread between short and long rates has now compressed to its lowest since the end of 2007. Flat yield curves typically foreshadow an economic slowdown, or even a recession, but now as in 2007, most are brushing off the forecasting abilities of this stalwart real-time indicator.
- TCW's Diane Jaffe reminds there are other factor's affecting bank profitability, and notes speedy loan growth in August, and a more than doubling in one-month Libor - a benchmark for loan pricing - since October 2015.
Tue, Aug. 30, 11:11 AM
- The estimated dividend yield on the financial sector as of Aug. 1 is 2.28%, but that's expected to fall 20 basis points after REITs leave for their own sector, reports Daisy Maxey in the WSJ.
- The drop doesn't seem like much, but in a world of microscopic interest rates, 20 bps is a relative whopper.
- "A lot of people will sit down and crunch the numbers, and they may change their minds” about financial sector holdings, says S&P Dow Jones' David Blitzer.
- The change will occur after the market close on Aug. 31, but will be implemented in the indexes on Sept. 16. Mortgage REITs will remain in the financial sector.
- Fund companies aren't expecting any tax impact, but they're making no guarantees. Vanguard will be transferring about 26.4% of the securities in its $3.8B Financial Index Fund (MUTF:VFAIX) and 26.4% of those in its $3.7B Financials ETF (NYSEARCA:VFH) out of the funds through a quarterly rebalance.
- Another fund with work to do is the iShares Edge MSCI Minimum Volatility ETF (NYSEARCA:USMV), which has 10.4% of assets in real estate names. The percentage exposed to real estate will likely slip, and that to financials increase, according to BlackRock.
Tue, Aug. 2, 1:55 PM
- WTI crude oil has erased an early gain, and is now lower this session by 1.7% to $39.38 per barrel, its weakest level in four months. USO -1.5%.
- It's dragging down the energy sector (XLF -1%), though the broader S&P 500 is faring a bit worse. The VanEck Vectors Oil Services ETF (OIH -1%)
- Previously: Rough stretch for offshore drillers continues (Aug. 2)
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, UGA, USL, DNO, OLO, UHN, SZO, OLEM, OILD, OILX, OILU
Fri, Jul. 15, 2:55 PM
- There aren't a whole lot of catalysts for bank stocks unless there's a sustained rise in the 10-year Treasury yield, says FBR's Paul Miller. "I'm going to be buying these things all day long," will be investors' attitude once yields do move higher.
- Until then, one might have a look at those with high exposure to mortgages - Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), and PNC Financial (NYSE:PNC) - as they stand to benefit from the refinancing boom. This has risks as well as refi booms inevitably burn themselves out.
- ETFs: XLF, KBE, KRE
Thu, Jul. 14, 2:43 PM
- Moving past the overseas macro, today's modest rally is being led by the financial sector (XLF +1%), particularly the banks (KRE +1.8%), (KBE +1.8%) after JPMorgan beat estimates.
- Also helping is another five basis points move upward in the 10-year Treasury yield to 1.53%. Among the yield-starved names applauding: Prudential (PRU +3.1%), Lincoln National (LNC +4.7%), E*Trade (ETFC +1.8%), Schwab (SCHW +1.9%), State Street (STT +2.5%), MetLife (MET +5.2%).
- The Dow is up 0.8%, the S&P 500 0.55%, and the Nasdaq 0.6%.
Tue, Jul. 5, 4:17 PM
- Interest rates continue to plummet, with U.S. government yields on the long end hitting new all-time lows. At least they remain positive (for now). Yields on French government paper are now negative all the way out to nine years, and Swiss 50-year bonds now sport yields below zero.
- Some hawkish words today from San Francisco Fed President Williams weren't enough to lift the share prices of yield-starved financials (XLF -1.5%).
- The SPDR KBW Bank ETF (KBE -3%), the SPDR KBW Regional Bank ETF (KRE -3%)
- Citigroup (C -3.3%), Morgan Stanley (MS -3.5%), Regions Financial (RF -3.9%), Fifth Third (FITB -4.2%), Capital One (COF -3.3%), Legg Mason (LM -3.3%), E*Trade (ETFC -3.2%), Schwab (SCHW -3%), MetLife (MET -4.2%), Prudential (PRU -3.2%), Lincoln (LNC -4.5%)
Fri, Jul. 1, 7:53 AM
Thu, Jun. 30, 10:51 AM
- Dividend increases and boosted buybacks must already have been priced into the shares of the big banks, as share prices are showing little reaction to last night's capital plans.
- Citigroup (C -0.6%) is notably lower despite announcing more than a tripling in the dividend. Bank of America (BAC -0.8%) was more cautious with its payout boost, but is faring about the same. JPMorgan (JPM unch) chose not to lift its dividend, but did raise the buyback. Morgan Stanley (MS +0.6%) lifted both. Wells Fargo (WFC -0.5%) didn't give details other than saying its capital plan was approved; same for Goldman Sachs (GS +0.1%).
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF, KBE
Wed, Jun. 29, 3:13 AM
- The Fed will tell 33 of the nation's largest banks today whether they fully passed or failed their annual stress tests.
- Traders are closely watching the CCAR reports to see whether lenders can afford their planned dividends and buybacks, and if Wall Street has enough capital to survive another financial crisis.
- U.S. units of Deutsche Bank (NYSE:DB) and Banco Santander (NYSE:SAN) were the only firms to fail the tests in 2015.
- Previously: All 33 banks pass this year's stress tests (Jun. 23 2016)