Lates News

Data shows that American banks and financial stocks are on the edge of breaking through key support levels, sending a warning signal to the entire stock market. The weakness in this sector is driven by credit problems and traders cutting back on bets for a Federal Reserve rate cut, threatening one of the pillars the market was hoping for an end-of-year rally. The KBW Bank Index has fallen 4.5% in the past five trading days while the S&P 500 Bank Index recorded a 2.9% decline during the same period. Matt Maley, Chief Market Strategist at Miller Tabak, wrote, "If bank stocks continue to fall significantly in the next one or two weeks, it will send a major warning signal to this crucial group." Maley believes that the decline in financial stocks indicates that "there are quite a few cracks appearing in the bullish argument for the stock market" as market expectations for this sector are high when investors anticipate a rate cut. He wrote that further evidence of worsening credit conditions will lead to additional volatility in the market. It now appears that some of the 'one-off' problems faced by financial companies may not be as 'unique' as many experts have told us.