Stocks of Goldman Sachs, Bank of America and Citigroup all were hit hard Friday, which deepened their slumps during 2016 even further and now have near double-digit losses in value. Banks were amongst the worst performers on Friday, dragging the Dow downwards more than 100 points.
Up until the start of business on Friday’s poor jobs report, stocks in banks were beginning to rebounds; buoyed through the hope the Federal Reserve was going to raise its interest rates again.
That would have been massive since the banks struggle to earn profits when the rates become ridiculously low as they are currently.
However, the Friday jobs report was poor and that lowered dramatically the chances of a rate hike later this month and sent bond rates from the U.S. Treasury tumbling to lows that could be only described as insane.
The hope of having interest rates higher was at the least delayed and the worst was derailed, said a chief strategist for a financial company.
Things for banks are so poor that the BKX or KBW Bank Index, which tracks 24 banks, is headed for its poorest performance for the first six months of a year since 2011.
That was the year the sovereign debt crisis in Europe freaked out many investors raising worries over a new meltdown in the financial market.
Individual banks are down more, as Bank of America slide 2% more on Friday, which put it at 17.6% down for the year.
That is the worst first six-month performance for the bank in 5 years, when it dropped in 2011 by 18%.
Citigroup is now off by 15% and on track to have its worst six-month start since 2009, when it was down an outrageous 56%.
Morgan Stanley is down 19% in 2016 and is set to record its worst first six months since 2008.
Goldman Sachs has also been caught in this storm. Shares of the investment bank have dropped by 16% in 2016, its ugliest beginning to the year in the past 5 years, when it fell by 21%.
This most recent slump was triggered by shrinking bond rates across the globe. The yield for the 10-year benchmark Treasury note dropped to a low of four-months on Friday of 1.64%.
That is bad news due to banks making money off the difference between what depositors owe on interest payments and what the bank pays its depositors.
While rates in the U.S. are outrageously low, they are better than those in many countries, as some rates are close to negative across some parts of Europe.