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James Hyerczyk
US Stock Markets

Heightened volatility could be the theme in Friday’s U.S. stock market session if the after-market activity is an indication. Stocks being pressured during the after-market trade are Nike, Facebook, American Airlines, Wells Fargo and MGM Resorts. However, the entire market remains at risk due to a major announcement by the Federal Reserve that may erase most of Thursday’s banking sector gains.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3083.76, up 33.43 or +1.11%. The blue chip Dow Jones Industrial Average rose 25745.60, up 299.66 or +1.19% and the technology-driven NASDAQ Composite ended at 10017.00, up 107.83 or +1.19%.

Thursday Recap:  FDIC Decision Boosts Bank Shares

Stocks ended a volatile session on Thursday with solid gains as investors cheered regulation rollbacks for the big banks. The Federal Deposit Insurance Commission said it would allow banks to more easily make large investments into funds such as venture capital funds. Also banks will not have to set aside cash for derivatives traders between different affiliates of the same firm, potentially freeing up more capital.

“When we think about a recession of the magnitude that we have, there’s going to be some credit write-offs by banks,” said Art Hogan, chief market strategist at National Securities. “The fact that they’re going to have more working capital makes markets breathe a sigh of relief.”

Bank of America, JP Morgan Chase, Citigroup and Wells Fargo all rose more than 3%. Goldman Sachs also gained 4.6% while Morgan Stanley advanced 3.9%. Shares of major banks jumped to their highs of the day in the final hour of trading as investors looked ahead to the Federal Reserve releasing stress-test results for the major banks. Those results were released after the close.


Fed:  Some Banks Could Be Stressed in Pandemic

Bank stocks slumped after the close of regular trading in New York after the Federal Reserve put new restrictions on the U.S. banking industry Thursday after its annual stress test found that several banks could get uncomfortably closer to minimum capital levels in scenarios tied to the coronavirus pandemic.

The Fed said in a release that big banks will be required to suspend share buybacks and cap dividend payments at their current level for the third quarter of this year. The regulator also said it would only allow dividends to be paid based on a formula tied to a bank’s recent earnings.

Shares of Wells Fargo, which had climbed during the day, gave back some of those gains, falling 1.6%. JPMorgan Chase slipped 0.9%.

Futures Market Opening

If bank stocks led the major U.S. stock indexes higher on Thursday then they could put some pressure on the indexes on Friday, given the Fed announcements. The impact of the Fed’s decision could also put some pressure on shares in Asia and Europe early in the session.

For a look at all of today’s economic events, check out our economic calendar.

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