Merrill Slashes Ratings on AMEX, Capital One and Discover

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Includes: AXP, COF, DFS
by: Steven Towns

Merrill Lynch has cut the ratings of American Express (NYSE:AXP), Capital One (NYSE:COF) and Discover (NYSE:DFS) to "sell" from "neutral," saying the firm believes "deterioration in consumer credit and spending will continue to undermine the fundamentals of each and lead to share price declines," according to a report by MarketWatch. Morgan Stanley also downgraded Capital One, to "underweight" from "overweight." Morgan said there is a growing concern of a more severe cycle for the U.S. consumer finance industry than markets have discounted. Shares of American Express gained 2.8% to $59.53 on Thursday, but were last down 2.4% to $58.13 as of 08:20 in thin pre-market trading. Capital One climbed 5.0% to $52.43 on Thursday, but was last down 6.5% to $49.00 and Discover rose 5.3% to $17.32, but was off 3.6% to $16.70 in early trading. American Express and Capital One are components of the heavily traded Financial Select Sector SPDR (NYSEARCA:XLF), which is down over 10% on the year, compared to a mostly flat American Express and year-to-date losses of more than 30% for Capital One and 40% for Discover.

Additional Reading: Senate Panel Chides Credit Card Issuers on Rate PolicyAuto Loan Delinquencies Surge - WSJ

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