We’ve reached the end of the week and what a week it has been. A couple of overextended streaks came to an end during the trading week, including a Dow and Financials Select Spiders ETF (XLF) losing streak. Yesterday morning, we discussed the potential for XLF going forward.
“While the XLF and individual big banks have seen significant share price erosion throughout June, there may be some help on the horizon. Banks are set to receive approval to deploy capital to investors on Thursday as a part of the second leg of its banking “stress tests”.
“Golden also believes one of the better buying opportunities in the market right now lay within the financials. For investors seeking diversity within the financial sector, the XLF may very well be the instrument to choose. Moreover, Golden also believes that while the technicals for the S&P 500 and Dow appear dangerous, that may prove to be a buy signal in hindsight and with corporate buybacks set to accelerate.”
Both the S&P 500 and XLF rose yesterday with the XLF ending a 13-day losing streak. With regards to the Fed’s stress test results and determinations, 35 banks were included in this year’s stress test and 18 of the biggest and most complex institutions had to go through both qualitative and quantitative parts of the exam. Of those, 15 firms were cleared by the Fed and will be allowed to proceed with their planned payouts, which could include hikes in dividends and buybacks.
As shown in the chart above, the XLF has traded below its 200-DMA recently, which tends to be a net negative near-term. But with the supportive conclusions of the stress test results and upcoming earnings-reporting season, such variables could turn the tide for the financial sector and XLF. Already, post the stress test results, the banks have responded with payout announcements as follows:
J.P. Morgan Chase & Co. said it will increase its quarterly dividend to 80 cents a share from 56 cents a share and buy back up to $20.7 billion in stock. American Express Co. will hike its quarterly dividend 11% to 39 cents a share and buy back up to $3.4 billion in shares. Citigroup Inc. said it will increase its quarterly dividend to 45 cents a share from 32 cents a share and buy back up to $17.6 billion in shares. Wells Fargo & Co. said it will increase its quarterly dividend to 43 cents from 39 cents a share and buy back up to $24.5 billion in stock. Bank of America Corp. said it will increase its quarterly dividend by 25% to 15 cents a share and buy back up to $20.6 billion in shares. Fifth Third Bancorp increased its quarterly dividend to 22 cents a share from 18 cents a share, and said it would buy back up to $1.65 billion in shares. Regions Financial Corp is hiking its quarterly dividend to 14 cents a share and buy back up to $2.03 billion in shares. Huntington Bancshares Inc. will hike its quarterly dividend 25% to 14 cents a share and announced up to $1.07 billion in buybacks. Capital One Financial Corp. will keep its quarterly dividend at 40 cents a share and buy back up to $1.2 billion in shares. KeyCorp hiked its quarterly dividend 42% to 17 cents a share and announced up to $1.23 billion in buybacks. State Street Corp. will raise its quarterly dividend to 47 cents from 42 cents a share and buy back up to $1.2 billion in stock. PNC Financial Services Group Inc. said it will hike its quarterly dividend by 27% to 95 cents a share and buy back up to $2 billion in stock.
