US banks tumble as weak economic data sparks recession fears
05/08/2024 15:56
Aug 5 (Reuters) - U.S. bank stocks slumped on Monday as
fears of a recession sent investors fleeing from a sector
closely tied to the health of the economy and toward safe-haven
assets.
Citigroup C.N led big bank losses with a 6% fall. Wells
Fargo WFC.N , Bank of America BAC.N and Goldman Sachs GS.N
fell about 4% each, while JPMorgan Chase JPM.N and Morgan
Stanley MS.N declined 2.5% and 3.5%, respectively.
Lenders are highly susceptible to an economic downturn as
recessions heighten concerns over credit losses due to higher
unemployment, while loan demand - a key factor in profitability
- also takes a beating.
Investors have been increasingly jittery since a crisis of
confidence hit the sector last year, in part due to higher
interest rates, and took down three major regional players.
Customers Bancorp's CUBI.N shares fell nearly 7%, while
Banc of California BANC.N , Citizens Financial CFG.N , and US
Bancorp USB.N fell between 3.5% and 4.5%.
The S&P 500 Banks Index .SPXBK , tracking a basket of
large-cap bank stocks, was last down 3.3%, while the KBW
Regional Banking Index .KRX fell 4%.
The U.S. unemployment rate jumped to a near three-year high
of 4.3% in July amid a significant slowdown in hiring,
heightening fears the labor market was deteriorating and
potentially making the economy vulnerable to a recession.
The employment report, which also showed the increase in
annual wages last month was the smallest in more than three
years, prompted some Wall Street institutions, including Bank of
America Securities, to pull forward their rate cut expectations
to September from December.
The S&P 500 Banks Index is down 7.2% month-to-date vs a 3.2%
decline in the benchmark S&P 500 .SPX , as of last close. The
KBW Regional Banking Index .KRX has lost 7.6% over the same
period.
(Reporting by Manya Saini in Bengaluru; Editing by Sriraj
Kalluvila)
((Manya.Saini@thomsonreuters.com; X: manya__saini;))