A Good News, Bad News Story for Banks and Financials

June 26, 2020 07:57 AM
Banks pass Fed's stress test
Fed warns of Covid-19 aftermath and mounting bad loans
Michigan Consumer Sentiment Index comes out today
Stock Market Update for Traders


Thursday's Close

E-mini S&P 500 Futures (September): Settled at 3070.75, up 21.75

E-mini Nasdaq-100 Futures (September): Settled at 10,088.25, up 77.50

On Thursday, the U.S. set a record for new virus cases. The curve across some southern states steepened sharply, in particular, Texas and Florida. On a positive note, the rate of deaths hasn’t followed suit.

U.S. benchmarks are unchanged ahead of the bell after grinding out a strong close yesterday. The S&P 500 index traded to a new low overnight, ahead of Thursday’s session, and held the retest at the open. While the Nasdaq-100 marginally breached its overnight low on the open, risk-assets queued off strength in the energy sector to begin turning a corner, sealing a rejection and the rest was history. Tech and healthcare both performed very well, but it was the banks that led the late charge after passing the Federal Reserve’s stress test. The XLF ETF (financial services) gained 2.65%. However, the Fed warned of the Covid-19 aftermath and potential mounting bad loans. They banned buybacks and capped dividend payments to combat potential losses. 

Stocks around the globe gained ground overnight on the heels of that late U.S. strength. China was closed on holiday, but Monday night we look to June Manufacturing PMI. ECB President Lagarde spoke early this morning and said the worst of the pandemic is likely over, however, warned of an economic shift in the aftermath that will mark some businesses obsolete.

From the U.S., we had Core PCE Index at 7:30 a.m. CT, the Fed’s preferred inflation indicator. This May read brings Personal Spending and Income components that made headlines one month ago. Spending fell by a record amount as individuals stayed home in quarantine in April. However, due to stimulus checks and unemployment that earned some more than their jobs, income rose by a record. The data is expected to return to the mean today. Final June Michigan Consumer Sentiment reads are expected at 9:00 a.m. CT. 

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