March 27 Shares in U.S. banks led broader market
losses on Monday as the failure of the Republican's healthcare
bill intensified investor doubts whether President Donald Trump
would be able to deliver on his pro-business policy promises.
After rallying more than any other sector after the
election, banks appeared to be most vulnerable to a pull back
based on concerns about the Trump agenda.
The S&P Financial index, which includes insurance
companies as well as banks, fell as much as 2.3 percent with
Morgan Stanley its biggest percentage decliner.
The S&P bank subsector index fell as much as 2.5
percent on Monday after falling 5.9 percent in the last 6
sessions as it became increasingly clear Trump was struggling to
gain support in his own party for his proposal to repeal
President Barack Obama's Affordable Care Act.
The S&P bank sector rose as much as 34.8 percent after the
election as investors bet it would benefit hugely from lower
taxes, lighter regulation and economic growth under Trump.
The President promised to focus on tax reform after the
Republicans pulled their healthcare bill on Friday. While tax
reform would help banks, investors were not confident Trump
would succeed in delivering it.
"The prevailing view is that it may be difficult to get any
of the changes done," said Brian Kleinhanzl, an analyst covering
banks at Keefe, Bruyette & Woods in New York.
Even if tax reform happens, the concern is that it might be
a watered down version of the massive tax cuts Trump promised.
"The potential to get tax reform done sooner is positive.
But there's concern about the potential impact because you might
have to bring the Democrats along. You might have to make it
less impactful. You might not get as low a rate as you wanted,"
said KBW's Kleinhanzl.
The KBW Regional banking index faced a steeper
decline than bigger banks on Monday as investors worried about
prospects for loan growth amid policy uncertainty. After falling
as much as 3.4 percent the index was last down 1.5 percent.
Shares in Morgan Stanley, which was downgraded to a sell
rating by Compass Point on Monday, fell 3 percent to $41.12. It
had risen as much as 38.8 percent in the post election rally.
The S&P bank index pared losses but was still down 0.7
percent in late morning trade. Its biggest percentage decliner
was Huntington Bancshares,down 2.1 percent. The broader
S&P financial sector was last down 0.8 percent.
The S&P 500 index was down 0.3 percent on Monday.
(Reporting By Sinead Carew; Editing by Andrew Hay)