Markets edged lower
The markets continued to eke out higher highs last week though they closed at a moderate loss. The S&P 500 Index (SPX-INDEX) (SPY) was down 0.21% to close at 2,582.30, while the Dow Jones Industrial Average (DJI-INDEX) (DIA) fell 0.50% to 23,422.21, and the NASDAQ Composite (COMP-INDEX) was lower by 0.20% to 6,750.94. The decline in the S&P 500 was led by weak earnings from the online travel companies and a drop in financials.
Financials were the biggest losers
The S&P 500 Financial Index fell 2.7% last week, dragging down the benchmark index. The Bank of America (BAC), J.P. Morgan (JPM), and Goldman Sachs (GS) were some of the biggest losers in the benchmark index. Bank of America (BAC) fell the most by 4.7% followed by Wells Fargo (WFC), J.P. Morgan (JPM), Morgan Stanley (MS), and Citibank (C) with falls of 4.5%, 3.9%, 2.5%, and 2.4%, respectively. The financial ETFs like the Financial Select Sector SPDR ETF (XLF) and the Vanguard Financials ETF (VFH) plunged 2.6% and 2.5%, respectively.
Financials were lower due to the yield curve being at its flattest since 2007. A flat yield curve can lead to a decline in banks’ margins, as banks borrow at short-term rates to lend for longer periods. Moreover, markets were also nervous about the future of the tax cut plan.