|
|
By Matthew
Klein | Friday, December 18 De-Stressing.
Christmas came early for U.S. banking
investors Friday, after big banks fared well in the Federal
Reserve’s latest stress tests. Earlier in the year, the Fed had banned banks
from buying back their own stock and restricted how much they could
distribute in dividends. The Fed
wanted banks to preserve capital to protect depositors and other
creditors, while ensuring that lenders could still finance new
loans. But with vaccinations starting and the economic situation set to
improve shortly, those provisions may now be excessive. So now the banks
are being graded on a different curve. As a result, the Fed
announced late today that buybacks and dividends are back on
the menu for 2021. The news
came too late to help stocks, which closed down slightly. The S&P
500 index of large U.S. companies and the Russell
2000 index
of small ones each lost about 0.4%, while the tech-heavy Nasdaq
Composite was flat. Six of the
S&P’s 11 sectors fell, with real estate and energy stocks leading the
declines. Materials and consumer staples had the best days. Copper and oil
prices were up even as gold and silver prices fell, which suggests that the
growth outlook is still robust. The copper price is the highest since
February 2013, while Brent crude oil has been rising for seven straight
weeks, the longest consistent uptrend since 2010. The most
exciting market action was in Tesla stock, which is set to officially join the
S&P 500 on Monday. At current market prices, Tesla’s equity is worth
almost $700 billion, which means it will immediately become one of the
largest components in the index, ahead of every other company except for
Apple, Microsoft, Amazon.com, Alphabet, and Facebook. Tesla’s
stock price gains this year—up more than eight times since January—are
unprecedented for a company of its size. For some
perspective, Tesla has gained $272 billion in market value in just the
month since S&P announced it would be adding the company to the
large-cap index. The entire company was worth $272 billion as
recently as July. Meanwhile, Toyota, which
makes vastly more cars at higher margins, is currently worth $213 billion. On Friday
afternoon, the stock went wild, dropping more than 5% between 2:30 and 3:40,
only to jump 9% in the last 20 minutes. That kind of volatility may now flow
through to the broader S&P 500 index. Watch our TV
show on Fox Business Fridays at 10 p.m. or 11:30 p.m. ET; Saturdays at 10
a.m. or 11:30 a.m.; or Sundays at 7 a.m., 10 a.m., or 11:30 a.m. This week, PayPal CEO John
Rainey offers insights
on holiday season retail sales, and Barron’s Associate Editor Andrew
Bary names top stock
picks for 2021. |
|
|
DJIA: -0.41% to 30,179.05 The Hot
Stock: Fortinet +6.9% Best Sector:
Materials +0.5% |
No comments:
Post a Comment