Bank Shares Drift Lower Premarket As Growth Worries Return

Bank shares were muted in Wednesday’s premarket trading amid fears the rising COVID-19 cases could scuttle the revival in the economy.

The outlook for bank earnings has been hit by the marked drop in bond yields in recent weeks, as fears about resurgent inflation have given way to concerns that the economic rebound may be flattening out. Falling bond yields depress banks’ lending margins and consequently their profitability.

The yield on the 30-year Treasury bond has fallen below 2% again, while the 10-year

Goldman Sachs (NYSE:GS) and Wells Fargo (NYSE:WFC) were down 0.2% each in premarket trading. Bank of America (NYSE:BAC) was trading 0.4% lower while JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) were both flat.

Tuesday, Goldman Sachs, at 1.1%, fell the least of the five. Wells Fargo had the biggest fall at 3.5% while others lost 1.6%-2.6%.

While more than half the U.S. population is now vaccinated with at least the first dose, the fast spread of the Delta variant, that first emerged in India, is now creating new anxiety. The market will be looking to see later whether that anxiety has reached the Federal Reserve, which publishes the minutes of its latest policy meeting at 2 PM ET (1800 GMT).

At its last meeting in June, the U.S. Federal Reserve raised its estimate for 2021 growth to 7% from the 6.5% estimate issued in March. The central bank’s policymakers’ ‘dot-plot’ also hinted at the possibility of two rate hikes in 2023, earlier than the 2024 schedule indicated in March. Many are still skeptical about the timing though.