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Financials rebound as Trump moves against Dodd-Frank

Investors piled into bank shares on Friday following news that Donald Trump will begin the process to undo parts of the Dodd-Frank financial reform law.

The S&P 500 financials sector advanced 2 per cent and propelled it back into positive territory for the year on Friday. Within the broad group, the banks subsector gained 2.6 per cent, giving both their best day since November.

Morgan Stanley shares were up 5.5 per cent to $44.43, while Goldman Sachs shares rose 4.6 per cent to $240.95. Meanwhile, Invesco shares climbed 4.6 per cent to $30.90.

Financials initially outperformed the broader US equity markets after the election of Mr Trump on expectations that he would reduce regulations and stimulate the economy. While the sector remains well ahead of the broad market since November, sentiment had ebbed in the wake of recent earnings as investors awaited policy details on regulation from the new administration.

The gains in financials on Friday accompanied a broader advance in US stocks. At the close, the S&P 500 was up 0.7 per cent to 2,297.4 and the Dow Jones Industrial Average climbed 0.9 per cent to 20,071.5. Meanwhile, the Nasdaq Composite gained 0.5 per cent to 5,666.8.

The Dow Transports index ended a five consecutive day losing streak — the longest the index has suffered since last April — on Friday, up 1.5 per cent, as shares of FedEx, UPS, and Kirby gained renewed momentum.

The index’s gains, which coincided with a rise by the blue-chip Dow Jones Industrial Average, are closely watched by Dow theorists. Earlier this month, both indices closed at record levels, which is viewed by some investors as a sign of good news to come. The transports are also closely scrutinised as a barometer of broader US economic growth.

Shares of Kirby, which operates tank barges, climbed 5.9 per cent to $68.45, Ryder System gained 3.1 per cent to $74.01, FedEx rose 2 per cent to $188.21 and UPS advanced 1.8 per cent to $106.95.

Despite the enthusiasm for shipping groups, the same investor appetites did not extend to airline stocks on Friday. The NYSE Arca airline index was flat on the day and has lagged behind of late after climbing to a 15-year year higher earlier this year.

The sector has come under pressure as fuel and labour costs have risen, alongside concern that a travel ban implemented by the Trump administration could curtail demand from some international markets.

Shares of SkyWest dropped 6.2 per cent to $34.53 while Allegiant Travel and Alaska Air Group were down 0.6 per cent to $162.10 and 0.5 per cent to $94.09, respectively. Advances by Delta of 0.9 per cent to $47.81, United Continental of 1.3 per cent to $73.06 and American Airlines of 0.4 per cent to $44.20 offset those declines.

Elsewhere, Visa shares surged 4.6 per cent to $86.08 after the electronic payment network posted upbeat fiscal first-quarter results.

Visa said net income rose 7 per cent from a year ago to $2.1bn or 86 cents a share, while revenues jumped by a quarter to $4.46bn. Analysts had forecast earnings of 78 cents a share, on sales of $4.3bn.

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