On a day when companies repay their debt in advance, their stocks on bourses should advance, but Wednesday (June 18) was not any other normal day.
On Wednesday, ten banks, including Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) Goldman Sachs Group, Inc. (GS), U.S. Bancorp (USB) and BB&T Corp. (BBT), announced that they have redeemed the preferred shares that they issued to the Treasury under the TARP program. The repayments by ten of the nation's largest financial institutions were estimated to total about $68 billion. However, financial stocks came under sharp pressure and finished 2.6% lower. Banks were a primary source of weakness as credit ratings agency Standard & Poor's (S&P) lowered its ratings and revised its outlooks on 22 banks.
Financial stocks led the S&P 500 briefly below its 200-day moving average, but stocks were able to find support there. In turn, the stock market swung from a 0.9% loss at its session low to a 0.7% gain at its session high. The advance failed to hold into the close, though.
U.S. Bancorp (USB), which repaid $6.6 billion and BB&T Corp. (BBT) that paid back $3.1 billion couldn’t escape the wrath of investors as S&P cut their ratings. BB&T Corp., Capital One Financial Corp., Regions Financial Corp. and Wells Fargo & Co.
