US bank shares slumped as Fed caps dividends, bars share buybacks until Q4, 2020



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US bank shares slumped as Fed caps dividends, bars share buybacks until Q4, 2020

On Friday, following the annual stress tests for the US lenders, the US Federal Reserve had kept a lid on dividend payoffs and had barred share repurchase programs until at least the end of the fourth quarter of the year, which eventually had drowned the financials’ stocks on Friday’s Wall St.

On top of that, upon reveal of the Fed’s announcement to cap dividends and to bar share repurchase programs, the banking index of S&P 500 had faltered as much as 5 per cent, while the S&P 500’s financials’ index had drooled over 4 per cent.

Aside from that, while the benchmark Standard & Poor 500, accountable for roughly 45 per cent of all trading activities in the Wall St., had winded up the day down by more than 2 per cent, shares’ prices of big-league US lenders such as JPMorgan Chase & Co., Citigroup Inc.

and Bank of America Corp., the former Bank of America Merrill Lynch, had been plunged by more than 5 per cent, while the Wells Fargo and the Capital One Financial, which appeared to be more vulnerable in Fed’s annual stress test, had been the hardest hit on Friday’s Wall St.

with shares’ prices of both of the lenders wrecking over 8.3 per cent.

Drop in bank shares in part tied to worries over economic recovery

Meanwhile, as the Friday’s Fed move, that wrecks havocs on US lenders’ shares’ prices, to limit lenders’ movement in the Wall St.

came forth as part of an approach to maintain a substantial sum of liquidity as a safety-clutch, a chief market strategist at Prudential Financial in Newark, New Jersey, Quincy Krosby said following the Fed announcement, “Overall it does suggest that the Fed is concerned about the strength of the recovery, and the effect it will have on banks.

I think it was expected by the market but not to this extent,” adding that the broad-based sell-off of the financials’ stocks could be tied to the stabbing wounds in the US economy caused by the pandemic’s fiscal fallouts.