The largest banks in the U.S., notably JPMorgan and Bank of America, led banks to outpace the overall market downward Wednesday, May 31.
Bank of America Corp. dropped 2.18% to $22.41 after Chairman and CEO Brian Moynihan noted the company expects to see its sales and trading revenue fall 10% to 12% short of the 2016 second quarter's total, which was boosted by volatility from Brexit. Moynihan also said the bank expects to take a $300 million charge in the second quarter from the consolidation of data centers.
JPMorgan Chase & Co., which was down 2.09% to $82.15, also said at a conference that it anticipates a steep decline in trading revenue from the prior-year period. CFO Marianne Lake noted that the company is on pace to see a 15% decrease. "I feel like the performance is quite good, but there is not a lot to trade around right now. And so there's not a lot of market themes. There haven't been that many idiosyncratic events, and we need a few more of them," she said, according to a transcript.
The revelations signaled that trading revenues may be "back to the doldrums," said Jack Ablin, chief investment officer at BMO Wealth Management.
The first quarter's markets business performance at banks was "a big surprise to the upside" and had investors thinking the negative trends in bond trading had possibly turned a corner, but Wednesday's news pumped the brakes on that notion, he said. "That was probably what financial investors keyed on today," he added.
Other large-cap banks and superregionals followed suit in trading. Citigroup Inc. fell 1.78% to $60.54, Wells Fargo & Co. slipped 1.96% to $51.14, KeyCorp sank 2.02% to $17.47, and Capital One Financial Corp. dipped 1.74% to $76.92.
Also speaking at the conference, Wells Fargo's John Shrewsberry said many of the company's clients are in a "holding pattern" waiting on action from the Republican-controlled White House and Congress, after an initial surge of optimism.
Rafferty Capital Markets analyst Dick Bove kept his positive outlook on Bank of America and JPMorgan. BofA is "the core bank to own in a bank portfolio," he wrote in a midday note. Bove is not positive concerning bank stocks in general, but believes BofA stands out.
"When Brian Moynihan spoke at one of the banking conferences today, he outlined a different view from that being expressed by his peers," the analyst wrote. "He is arguing that the bank is developing responsible sustainable growth."
The SNL U.S. Bank Index was down 1.38% to 511.38, and the SNL U.S. Thrift Index declined 0.14% to 873.44. The Dow Jones Industrial Average decreased 0.10% to 21,008.65, the Nasdaq composite index shed 0.08% to 6,198.52, and the S&P 500 ticked down 0.05% to 2,411.80.
In broader economic news, the Federal Reserve's district banks saw their economies expanding at a "modest to moderate" pace, according to the latest Beige Book. Employment grew at a similar pace, they reported.
In thrifts, New York Community Bancorp Inc. dipped 0.31% to $12.92 and TFS Financial Corp. (MHC) lowered 0.76% to $15.62.
Market prices and index values are current as of the time of publication and are subject to change.