As the world has struggled with a global pandemic, financial markets have been on quite the rollercoaster ride. However, amidst all of this volatility and uncertainty, one thing remains certain: US bank stocks continue to be a beacon of stability and strength. In fact, they led the way just recently on another volatile market day. So why are these particular stocks holding up so well in such trying times? Let’s take a closer look at what’s driving their success and what investors can expect moving forward.
What happened on Black Friday?
On Black Friday, the stock market experienced heavy volatility as investors reacted to a number of economic and political news events. The Dow Jones Industrial Average (DJIA) fell 1,175 points, or 3%, while the S&P 500 dropped 1.5%. The NASDAQ Composite also plummeted 4.3%, its worst performance since February 10, 2008.
The day’s biggest losers included US Bank, Wells Fargo, and Amazon.com; all three stocks went down more than 7%. The biggest winners included Apple and Facebook, both of which rose more than 7%.
According to CNNMoney’s Fear & Greed Index, sentiment was “fearful” on Black Friday. This is likely due to concerns about global trade tensions, the Trump administration’s proposed border adjustment tax, and potential interest rate hikes by the Federal Reserve.
What are stocks doing today?
The market opened sharply lower on Wednesday, with the S&P 500 SPX, -0.04% falling as much as 1.7%, its worst start to a day since Oct. 27, 2011. By late afternoon, however, the broader indexes had recouped some lost ground and were trading modestly higher. The Dow Jones Industrial Average DJIA, +0.26% was up 0.2% while the Nasdaq Composite Index COMP, +0.07% finished with a 1%. Over on Wall Street, stocks were led by US Bank NA, +1.71% which surged 9%. The bank’s stock had been in focus earlier in the day after it reported better-than-expected earnings for the third quarter of 2017 but also raised concerns about potential headwinds from rising interest rates and trade tensions with China. Other bank stocks also fared well Thursday morning: JPMorgan Chase & Co., JPM, +0.37% rose 3%, Wells Fargo & Co., WFC, -0.06% advanced 2%, and Goldman Sachs Group Inc., GS, -1.08% added 1%. Elsewhere in financials: Morgan Stanley MS, -1.01% was up 1%; Bank of America Corp., BAC, +0.32% was flat; and CitiGroup Inc., CITI, +1.89% gained 0.4%. In tech: Apple Inc.’s AAPL, -5420005000000
The risks and rewards of investing
The US stock market had an eventful day on Tuesday, with the Dow Jones Industrial Average (DJIA) recording its biggest single-day point gain in history. However, this rally was not without some bumps along the way. For instance, as of 8:00 PM EST on Tuesday, shares of JPMorgan Chase and Citigroup had both fallen by more than 5%. Despite these brief setbacks, the DJIA ended the day up 1.5% or around 286 points. This impressive performance is attributable to a number of factors, chief among them being strong Wall Street performances from banks and other financial services companies.
Overall, stocks represented about two thirds of all gains on Tuesday (DJIA: +1.5%, S&P 500: +2%, Nasdaq Composite: +3%). The technology sector led the pack in terms of percentage gains (up 6%), while healthcare (+4%) and consumer goods (+2%) were also among the strongest performers. Meanwhile, energy (-2%) and materials (-1%) were amongst the worst-performing sectors.
Given that stocks are a relatively volatile investment choice, it’s important to understand what risks are associated with investing in them and what rewards investors can expect. In short, there are three main types of risk when it comes to investing in stocks: price risk (the potential for declines in stock prices), fundamental risk (a company’s ability to meet future earnings expectations), and liquidity risk (the ability of buyers and
US Bank is leading the way
On Monday, the Dow Jones Industrial Average lost 263 points, or 1.9%, while the S&P 500 and the Nasdaq Composite both dropped 2%. But it was US Bank that led the way on a volatile market day. The bank’s stock rose 3.5% during trading, outpacing both the Dow and the S&P 500.
US Bancorp is one of the big four banks in the US and has $1 trillion in total assets. It has also been one of the strongest performers this year, rising 15%. In addition, its loan book has been expanding rapidly, driven by strong demand from consumers and businesses.
Other banks fared poorly on Monday. JPMorgan Chase fell 1.5%, Wells Fargo dropped 2.7%, and Citigroup shed 0.8%. But even among these banks, US Bank was still one of the leaders with its stock up 5%.
