Latest U.S. Economic Data Could Weaken Banks’ Strong Run

Weaker-than-expected economic data—underscored by July’s disappointing payroll report recently released—is challenging the strong momentum that has propelled U.S. bank stocks to record highs this year, Rebecca Ungarino and Janet H. Cho reported for Barron’s Daily.

Shares of JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo fell 2% to 3.5% at one point. (Photo: JPMorgan Chase) 

Shares of JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo fell 2% to 3.5% at one point, underperforming the broader market after the employment report came in far below economists’ expectations.

The numbers have raised concerns that the banking sector could soften in a slowing economy.

On recent earnings calls, executives from banks, asset managers, and payments companies have emphasized continued strength in consumer spending.

Yet Friday’s market reaction reflected growing doubts about that resilience, and traders began pricing in a higher likelihood that the Federal Reserve will cut interest rates as early as September.

Despite the market jitters, Bank of America CEO Brian Moynihan told CBS News on Sunday that the latest employment report is not a sign that the U.S. economy is heading into a recession.

BofA economists now forecast slower growth due to tariffs and trade tensions but still believe the economy will continue to expand.