Financial stocks took a broad hit Wednesday, as investor disappointment over Capital One Financial Corp.'s (COF) third-quarter results and the biggest drop in benchmark Treasury yields in three months acted as drags on the sector. The SPDR Financial Select Sector ETF (XLF) fell 1.2% in afternoon trading with 57 of 65 equity components trading lower, while the S&P 500 tacked on 0.2%. Capital One's stock tumbled 7.5% to pace the losers even after the financial services company reported third-quarter earnings that rose above expectations, helped by a $770.0 million reserve release. If the reserve release was excluded, the company would have posted a net income decline, and earnings per share would have been reduced by about $1.75. Among other more heavily weighted components of the financial ETF (XLF), shares of Bank of America Corp. (BAC) shed 1.3%, JPMorgan Chase & Co. (JPM) gave up 1.9%, Wells Fargo & Co. (WFC) fell 0.4%, Citigroup Inc. (C) lost 0.7% and Goldman Sachs Group Inc. (GS) gave up 1.0%. The yield on the 10-year Treasury note fell 8.4 basis points to 1.535%, the biggest one-day drop in yields since July 19, after data showing a decline in durable goods data. Lower long-term yields can eat into bank profits, as that can lower the spread banks earn as they fund longer assets, such as loans, with shorter term liabilities.
(END) Dow Jones Newswires
October 27, 2021 14:00 ET (18:00 GMT)
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