Why Did Wells Fargo and Citigroup Shares Fall?

Markets acquiring new peaks

US stocks rallied last week even though Japan and other emerging markets are reeling under tremendous pressure. The small-cap Russell 2000 Index and the tech-heavy NASDAQ Composite scored record highs, while the S&P 500 touched a five-month high. The S&P 500 rose 1.50% and closed the week at 2,801.31. The Dow Jones Industrial Average rose 2.30% to 25,019.41, while the NASDAQ Composite rose 1.79% to 7,825.98. The US ten-year Treasury yield remained flat at ~2.83% for a second week in a row.

Financials lagging broader markets

Even though the broader markets recorded new highs, US financials continued to disappoint. The S&P Financials Index rose 1.14% to 447.65, while the S&P Insurance Select Industry Index rose 0.76% to 2,757.98.

Why Did Wells Fargo and Citigroup Shares Fall?

Bank equities (XLF) have underperformed this year despite a strong economic recovery, a rise in interest rates, and deregulation. JPMorgan Chase (JPM), which posted a record second-quarter profit, was the top gainer last week with a 2.21% jump. Morgan Stanley (MS) rose 2.10% followed by Goldman Sachs (GS) and U.S. Bancorp (USB). Wells Fargo (WFC), which reported lower-than-expected earnings for the second quarter, was the biggest loss at 0.95%. Citigroup (C) shares fell 0.21% after the bank reported weaker-than-expected quarterly revenues.