Financial stocks are under pressure on Wednesday as Treasury bonds enjoy a multi-week rally despite consistent economic growth, a tightening labor market and evidence of a nascent inflation rebound with a higher energy price.
Not only is the yield curve flattening, but net interest margin hopes for the big banks are deflating along with the idea of an unimpeded Republican strategy.
As a result, the Financial Select Sector SPDR Fund (NYSEARCA:XLF) has broken down and out of a three-month uptrend pattern and now threatens a return to its 50-day moving average and perhaps even a decline to the 200-day average that was last tested in early September.
Watch for the selloff to gain traction as the 10-year Treasury yield threatens to fall back toward the 2% level.
In response, these five well-known bank stocks are getting hit with a rare bout of selling pressure:
Bank Stocks to Sell: Bank of America (BAC)
Bank of America Corp (NYSE:BAC) shares are down nearly 2% in trading on Wednesday, closing their mid-October post-earnings gap move to fall back towards its 50-day moving average.
In addition to net interest margin headwinds, financial stocks are being hit by concerns over tepid consumer credit growth as Americans resist the urge to go crazy with revolving credit like they did during the last cycle.
The company will next report results on Jan. 17 before the bell. Analysts are looking for earnings of 47 cents per share on revenues of $22 billion. When the company last reported on Oct. 13, earnings of 48 cents per share beat estimates by three cents on a 2.1% rise in revenues.
Bank Stocks to Sell: JP Morgan Chase (JPM)
JPMorgan Chase & Co. (NYSE:JPM) shares are rolling lower, closing a rally gap from last month, down roughly 4% from their recent high. A return to the June-September trading range would be worth another 6% decline from here.
The company has been in the news recently, but not for the reasons you would expect. CEO Jamie Dimon’s criticism of bitcoin has been an embarrassment as the price of the cryptocurrency has soared. And the company recently acquired WePay in an effort to expand its fintech presence.
The company will next report results on Jan. 12. Analysts are looking for earnings of $1.71 per share on revenues of $25 billion. When the company last reported on Oct. 12, earnings of $1.76 beat estimates by 10 cents on a 2.6% rise in revenue.
Bank Stocks to Sell: Wells Fargo (WFC)
Wells Fargo & Co. (NYSE:WFC) shares are reversing a head fake move above its June/July highs, falling back into the clutches of a long consolidation range that has put a damper on price movement all year long.
A drop back below the 200-day moving average looks likely here, which could set up a drawdown all the way back to its September low near $49 — which would be worth a 9%+ gain from here.
The company will next report results on Jan. 12. Analysts are looking for earnings of $1.02 per share on revenues of $22.1 billion.
When the company last reported on Oct. 13, earnings of 84 cents per share missed estimates by 19 cents on a 1.8% drop in revenues on a slowdown in loan growth.
Bank Stocks to Sell: Citigroup (C)
Citigroup Inc (NYSE:C) shares are threatening to fall below their 50-day moving average for the first time since September on a 5% decline off of their recent highs.
A breakdown would put the June-September support lows near $66 in play, which would be worth a further 8%+ loss from here. The company was recently downgraded to Sell by analysts at Societe Generale and is caught in the selling hitting the entire sector not just on net interest margin worries but concern a possible rollback of the mortgage interest deduction in tax reform legislation could further dampen loan growth.
The company is expected to next report earnings on Jan. 16. Analysts are looking for earnings of $1.28 per share on revenues of $17.6 billion. When the company last reported on Oct. 12, earnings of $1.42 beat estimates by 12 cents on a 2.3% rise in revenues.
Bank Stocks to Sell: State Street (STT)
State Street Corp (NYSE:STT) shares are threatening to fall below its June-September lows setting up a decline to levels last seen in May, which would be worth a fall of more than 13% from current levels.
Despite strong results, tied to stable equity market gains, investors demonstrated a “sell the news” dynamic when the company last reported results, possibly on a belief the good times cannot last much longer amid a historic lack of volatility.
The company will next report results on Jan. 24 before the bell. Analysts are looking for earnings of $1.68 per share on revenues of $2.97 billion. When the company last reported on Oct. 23, earnings of $1.71 beat estimates by 10 cents on a 7.7% rise in revenues.