Enthusiasm over the Federal Reserve’s decision on Wednesday to hold interest rates lower for longer than many economists expected just months ago has propelled US equities solidly higher but has had little impact on the lending industry.
The S&P 500 index has rallied 1.8 per cent since the close of trading on Tuesday,
but the bank index has edged up just 0.3 per cent, making it the weakest performer of the 24 industry groups.
Wells Fargo, among the biggest US banks by assets, has struggled the most, declining 1.8 per cent since Tuesday to $45.72. The group has seen its share price hit after US authorities this month fined it $185m on allegations its staff created up to 2m accounts without customers’ knowledge.
The news has deepened Wells’s woes, including a Congressional hearing this week in which chief executive John Stumpf faced stinging criticism over the phantom accounts.
But other large banks have also missed out on the bulk of Wall Street’s advance. Bank of America, for instance, is unchanged since Tuesday’s close at $15.60. The group is seen as particularly sensitive to interest rates since it has a large retail operation.
Low interest rates pressure banks’ profitability by compressing the difference between their funding costs and the rates they charge on loans.
JPMorgan Chase, meanwhile, has managed to post a gain of 1.4 per cent since Tuesday, bringing the shares to $67.39. The bank is seen as less rate-sensitive than BofA because of its asset mix.
On the other end of the spectrum, companies thought to benefit from lower rates because of their consistent dividend yields have outperformed the broader market.
Both the real estate and utilities sectors have risen more than 2 per cent since Tuesday’s close. Weyerhaeuser, a real estate investment trust that owns timberlands, has jumped 7.1 per cent to $32.08, while Exelon, a power utility, has climbed 3.9 per cent to $35.22.
Elsewhere, WCI Communities jumped more than a third to $23.67 after homebuilder Lennar agreed to buy the real estate group in a deal that values its equity at $643m. Lennar shares rose 0.4 per cent to $43.60.
At the close of trade, the S&P 500 had advanced 0.6 per cent to 2,177 and the Dow Jones Industrial Average climbed 0.5 per cent to 18,392.5.
The Nasdaq Composite rose as much as 0.8 per cent to 5,339.5, hitting a lifetime high for the second day in a row. The index has been lifted this month by a rally in the shares of several high-profile technology groups, including Apple.
The tech group has zoomed higher by 8 per cent in September as investors cheered the latest iteration of its iPhone.
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.