EmailThe S&P 500 Financial Index is once again leading the markets lower as it slips to its worst levels since November of 2010. Moody's announced that it was putting French banks on its watch for a possible downgrade. This has helped put selling pressure on the whole group as contagion concerns run rampant. Granted U.S. banks are generally in better shape than their European counterparts with regards to European Sovereign exposure. But the domino effect from a 'credit event' has the potential to freeze markets. In addition, economic data from the U.S. continues to disappoint.
One positive for the sector today was the continued improvement in credit card data as the most recent master trust reports hit the markets. Also the S&P as well as the XLF are coming into strong levels of support. For the S&P the 194-196 area provided support back in late 2010. And for the XLF the 14.50 level will provide support. Whether or not that is able to offset the negative headlines remains to be seen, but one shock headline can easily send the sector lower given the market instability.
News of Note
1) Master Trust Data: Citigroup (C) reports May credit loss component of 7.81% vs 7.85% in April (-4 bps m/m); May Delinquencies of 3.66% vs 3.87% in April (-21 bps m/m). Co also reports May delinquencies of 5-34 days of 2.37% vs 2.26% in April (11 bps m/m change).... American Express (AXP) reports May U.S. Managed Net write-off rate of 3.2% vs 3.5% in April (-30 bps m/m change); May loans 30 days past due of 1.6% vs 1.7% in April (-10 bps m/m change).... Capital One (COF) reports May Domestic Annualized Net Charge-Off Rate of 4.84% vs 4.97% in April (-13 bps m/m); May Delinquency rate of 3.32% vs 3.41% in April (-9 bps m/m). Co also reports May International Annualized Net Charge-Off Rate of 6.84% vs 7.06% in April (-22 bps m/m); Delinquency rate of 5.43% vs 5.51% in April (-8 bps m/m).
2) CFTC delays implementation of certain derivatives regulations from the Dodd-Frank Act.
