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Market Extra: Financials sink on Trump fears; Goldman has biggest decline since June

May 17, 2017
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Shares of financial companies fell sharply on Wednesday, leading the overall market’s decline as political turmoil in Washington intensified, weighing on investor sentiment.

The sector is seen as particularly attuned to the mood in D.C., having been one of the biggest beneficiaries to the so-called “Trump rally,” climbing on hopes that President Donald Trump would deregulate the industry and push through other initiatives that were seen as supportive to the sector’s profits. With the day’s decline, key exchange-traded funds tracking financials fell into correction territory, defined as a 10% drop from a recent peak, while some of the biggest banks suffered their worst daily drop in months.

Banks sold off as Trump faces controversy for his recent firing of then-director of the Federal Bureau of Investigation, who had been investigating Trump’s former-national security adviser and his ties to Russia during Trump’s presidential campaign. Late Tuesday, a report from the New York Times alleged that Trump asked Comey to end that investigation into Flynn—an allegation that the White House has denied. Among other things, the political uncertainty could mean that it is less likely that legislation considered to be market friendly will pass through Congress.

See more:Trump fears sink stocks worldwide as haven assets rally

Also: Most Dow stocks are below their 50-day moving averages

Don’t miss:Wall Street’s ‘fear gauge’ threatens largest daily pop in 8 months

The financial sector fell 3.4%, by far the biggest decliner among the 11 S&P 500 sectors. Among the biggest losers of the day was Goldman Sachs Group Inc.

GS, +0.25%

which tumbled 5.2%—putting its stock on pace for its biggest one-day loss since June 2016, after the United Kingdom voted to leave the European Union. Roughly 5.1 million shares exchanged hands, well above Goldman’s 30-day average of 3.6 million.

More than $4.6 billion was erased from Goldman’s market value on Wednesday, and the loss in the company’s stock price, along with shares of J.P. Morgan Chase & Co.

JPM, -0.07%

removed more than 100 points from the Dow Jones Industrial Average. The blue-chip average fell 330 points, or 1.6%, on Wednesday.

Shares of J.P. Morgan fell 4% while Bank of America Corp.

BAC, +0.35%

 plummeted 6%, also in its biggest one-day drop since June. Citigroup Inc. tumbled 4.4% on the day, while Morgan Stanley

MS, +0.17%

 slumped 6.5% and Wells Fargo & Co.

WFC, +0.15%

 lost 2.7%.

Among ETFs, the Financial Select Sector SPDR ETF

XLF, -0.02%

 fell 3.4%, turning negative for 2017, though it remains up more than 23% over the past 12 months and it is up TKTK since the election.

Two of the largest exchange-traded funds to track banks fell into correction territory on Wednesday, the latest sign of how what had been one of the most pronounced “Trump trades” has largely unraveled.


KBE, -0.39%

 lost 4.3% while the SPDR S&P Regional Banking

KRE, -0.15%

 shed 4.6%. Both have dropped more than 10% from a closing high hit earlier this year.

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