U.S. Bank Stocks Stumble After Earnings Fall Short of Expectations: The sector’s stocks struggle with overly high expectations for significant bank valuations.
The stocks of the largest U.S. banks have outperformed the broader market this year,
but this rise has halted due to results that disappointed investors.

Contents

Loss of Momentum

Results Insufficient to Maintain Momentum

Performance of Wells Fargo and Citigroup
Overly High Expectations

Loss of Momentum

Wells Fargo & Co. is headed for its worst decline on an earnings announcement day over three years after failing to achieve the expected net interest income.
Citigroup shares also fell, with a focus on expenses, even though its market revenues exceeded expectations.
Meanwhile, JPMorgan Chase & Co., whose shares saw the most significant drop a month after its results and stable guidance disappointed investors,
is set to recover some of those losses early in the session.

Results Insufficient to Maintain Momentum

In short, the results were insufficient to maintain momentum after a series of gains
led all stocks to rise more than 20% this year up until the day before yesterday’s close,
compared to the S&P 500‘s 17% gain. The moves were strong, especially considering yesterday’s broader market’s rise,
with about 425 stocks in the S&P 500 index posting gains.

Art Hogan, Chief Market Strategist at B. Riley Wealth, explained,
“The stocks of all three companies that announced results have risen significantly yearly.
This significant increase puts you where you have reached the maximum price range.”
The three stocks fell after the first quarter results announcement,

highlighting how profits increasingly pose a hurdle for the sector amid rising valuations.

Performance of Wells Fargo and Citigroup

Wells Fargo’s stock is the worst performer among index stocks during the trading session,
with shares falling as much as 7.6%, marking the most significant one-day decline since March 2023.
The giant lending institution warned in its earnings report that it will not be able to reduce costs
this year as quickly as expected after recording higher-than-expected expenses in the second quarter.
Citigroup’s stock also declined, ranking among the 10 worst performers in the S&P 500 index, dropping by 3.6%.

Overly High Expectations

The shares of the largest U.S. banks have seen significant gains in 2024 amid optimism about the Federal Reserve cutting interest rates,
the continued strength of the U.S. economy, and the potential easing of restrictive regulatory proposals.
While they remain significantly elevated despite yesterday’s session declines,
second-quarter results highlight the possible risks facing the banking group after heightened expectations.
Bank of America, Goldman Sachs Group, and Morgan Stanley will be in the spotlight early next week as they release their results.

U.S. Bank Stocks Stumble After Earnings Fall Short of Expectations

U.S. Bank Stocks Stumble After Earnings Fall Short of Expectations

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