Bank stocks tumble on weak jobs report
NEW YORK (AP) — Banks were pummeled Friday after weak economic data raised doubts about the timing of a possible interest rate hike by the Federal reserve.
The latest employment data shows that employers pulled back sharply on hiring in September. The 142,000 new jobs were far below the 200,000 that economists had projected, according to a poll by FactSet.
The Fed, to the surprise of many, held off on raising interest rates at its meeting last month and banks took a hit then, too.
The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago, which has constrained bank profits because it limits how much they can charge for loans and other products.
Fed Chair Janet Yellen has said that the job market has almost recovered. But she has also said she wants to see more hiring and pay growth so she can be sure that inflation is moving toward the Fed’s 2 percent target. Average hourly wages slipped a penny in September and have now risen just 2.2 percent in the past year.
Shortly after the jobs report came out, Citi Research analyst Keith Horowitz wrote that he expects JPMorgan Chase’s earnings to slip as much as 5 percent in 2016 and 8 percent in 2017.
“One of the questions we are getting more now is what happens to our (earnings-per-share) estimates if short rates remain low for the foreseeable future,” Horowitz wrote.
Here’s how bank stocks fared Friday.
— Shares of Bank of America Corp. fell 70 cents, or 4.5 percent, to $14.85.
— Citigroup Inc. fell $1.65, or 3.3 percent, to $48.24.
— JPMorgan Chase & Co. fell $1.96, or 3.2 percent, to $59.02.
— Wells Fargo & Co. fell $1.53, 3 percent, to $49.90.
— Smaller regional banks were hurt, too. Shares of BB&T Corp. fell 2.5 percent, Fifth Third Bancorp fell 3.5 percent and M&T Bank Corp. fell nearly 4 percent.