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Tuesday's Bank Stocks: Retail sales, 10-year Treasury yields lead to down day

Banks moved counter to broader markets Tuesday, May 15, as investors worried about the strengthening case for inflation.

The SNL U.S. Bank Index expanded 0.18% to 632.96, and the SNL U.S. Thrift Index added 0.60% to 956.61. The Dow Jones Industrial Average fell 0.78% to 24,706.41, the S&P 500 declined 0.68% to 2,711.45 and the Nasdaq Composite Index dropped 0.81% to 7,351.63.

Investors worried that positive retail sales figures would add to the case for strengthening inflation. Markets opened with the benchmark 10-year Treasury yields reaching above 3%. Domestic data showed that consumers still had some spending resilience even in the face of increasing gas prices as retail sales rose a seasonally adjusted 0.3% in April from the prior month and 4.7% from the prior year, according to a release from the U.S. Commerce Department. The strength may have led investors to believe that inflation could still be a threat to central bankers and policy setters.

Federal Reserve Bank of Dallas President Robert Kaplan said Tuesday that short-term U.S. growth should help inflation get closer to the U.S. Federal Reserve's 2% target, but long-term trends could mean that the central bank will have to adjust its expectations for prices. He said demographic trends could slow the path of rate hikes that the Fed should follow to get to what he called "a neutral rate" of inflation.

In banks, federal regulators are planning to remove a short-term trading assumption under the Volcker Rule as part of a proposed revamp, Bloomberg reported May 15, citing three people with knowledge of the matter. Other reforms they are considering include making it easier for banks to stockpile assets that customers may want to buy in the near term as well as reducing the compliance burden for smaller lenders; they are expected to release their proposed Volcker Rule revamp by the end of May.

In big banks, JPMorgan Chase & Co. shrank 0.76% to $113.03, Citigroup Inc. added 0.08% to $72.68, Bank of America Corp. grew 0.32% to $31.22 and Wells Fargo & Co. gained 0.50% to $54.75.

In other movers, Columbia Financial Inc. (MHC) improved 2.72% to $16.63, Guaranty Bancorp increased 2.40% to $29.90 and First BanCorp. rose 1.84% to $7.76.

S&P Dow Jones Indices and S&P Global Market Intelligence are owned by S&P Global Inc.

Market prices and index values are current as of the time of publication and are subject to change.