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Stock prices for small U.S. financial institutions remain depressed nearly a year after the local banking crisis.
The KBW Nasdaq Regional Bank Index, which tracks the performance of regional financial institutions and savings banks, has fallen more than 2.4% this year, compared with a 2.6% rise in the benchmark S&P 500.
During the same period, PNC Financial Services (PNC) stock fell 2.3%, Comerica Inc. (CMA) stock fell 1.5%, and US Bancorp (USB) stock fell 1.1%.
Regional banks announced their fourth quarter results this month, raising concerns that small financial institutions have not yet recovered from the worst of the worst period. KeyCorp (KEY)’s net income was down about 92% year over year, Citizens Financial (CFG) was down about 71%, Huntington Bancshares (HBAN) was down about 62%, and PNC Financial Services was down about 43%. became.
Adding insult to injury, the Federal Reserve announced Wednesday that it would end the Bank Term Funding Program, which was established to help lenders meet their liquidity needs in the wake of last year’s local banking turmoil. Although the program will continue for several more months, interest rates on new loans through the program’s March 11 deadline have been adjusted to be no lower than the interest rate on reserve balances.
“This development…is likely to challenge the health of local banks,” Jose Torres, senior economist at Interactive Brokers, said in a note Thursday.
Local bank stocks struggled for much of 2023 after the failures of Silicon Valley Bank and Signature Bank triggered a deposit flight and sent shockwaves through stock and bond markets.
While withdrawing money from the bank, the customer I am concerned that a potential credit crunch will prevent me from making good use of my savings. — most of whom were uninsured. High interest rates threaten to put pressure on local banks’ bond portfolios and cut into their profits, leading to a good old bank run.
Eventually, First Republic Bank also failed, becoming the second largest bank failure in history.
The ‘everything bull market’ in late 2023 saw assets from cryptocurrencies to gold to stocks race to rally as Wall Street grew more confident the Fed could bring down inflation without depressing the economy. So, regional bank stocks have experienced some respite.
The Federal Reserve has decided to cut interest rates three times through 2024. Investors had been optimistic that the central bank would start cutting rates in March, but those hopes have faded somewhat in light of closely watched economic data and warnings from Fed officials about cutting rates too soon.
But Alex McGrath, chief investment officer at North End Private Wealth, said the Fed’s decision to end the relief program for local banks could lead to a rate cut, especially after local banks reported a difficult quarter. This suggests that there is still a possibility. It starts in March.
“I can’t imagine a situation where the Fed would take an action like that without knowing what’s behind it,” McGrath said.
Sales problem in China. Patent litigation in the United States. behind With generation AI. 2024 is just weeks away, but the year ahead is rocky for Apple, my colleague Samantha Murphy-Kelly reports.
The tech giant’s continuing challenges are impacting many parts of its overall business.Just last week, Microsoft briefly Apple, which lagged behind the iPhone maker for much of the past decade, has taken over as the most valuable publicly traded company. The rise in Microsoft’s stock price was largely due to Apple’s early and widespread bet on generative artificial intelligence, which has remained largely silent.
But some analysts believe the company can navigate the minefield that mounts throughout the year.
“Apple remains the world’s largest company by market capitalization, so we’re confident they will do everything in their power to minimize the impact of these problem areas,” said David McQueen, an analyst at ABI Research. . “We will continue to have a very loyal user base, so our brand value, recognition and quality will not be compromised.”
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According to my colleague Brian Mena, the U.S. economy remained surprisingly strong in the fourth quarter, with continued consumer and business spending, capping off a remarkably strong 2023.
Gross domestic product (GDP), the broadest measure of economic output, grew at a seasonally adjusted, inflation-adjusted annual rate of 3.3% from October to December, the Commerce Department said Thursday.
That was lower than the torrid 4.9% from July to September, when U.S. consumers jumped on services and goods. The overall growth rate for 2023 from January to December last year was a steady 2.5%.
But rates in the fourth quarter were higher than economists expected to be 1.5%, according to estimates from FactSet. The economy’s strength in the final months of 2023 was broad-based, driven by improvements in consumer spending, business investment, government spending, exports, and housing conditions.
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