Daily Market Update : U.S. Fed Followed Script
The U.S. Fed followed script yesterday and cut interest rates by 25 basis points. American indices took the news calmly, closing only 0.20-o.25% lower. Investors like Gordon Reid were relieved to hear Fed Chair Jerome Powell vow to not cut rates to zero. However, a bigger surprise was how American bank stocks went up, not down which usually happens when rates are cut which threaten bank profit margins.
Bank of America closed yesterday up 0.71% at $1,474.40. Similarly, Wells Fargo Fargo spiked at 3:10 pm after Powell’s remarks to close 0.41% higher at $1,460. Citigroup enjoyed a 0.88% rise to $70.09. However, JP Morgan fared the best, spiking 1% to $119.76. In fact, the U.S. banks have been on a tear since Labour Day, with JPM-N soaring over 10% compared to 3.5% for the NYSE. The banks are defying gravity, but will it last?