Wells Fargo increased City and BAC fell.
On the days that market participants closely and with more concerns are following the central banks' and policy makers' decisions, Friday, eyes turned to the FED stress test. FED Stress Test is a good measure for new Capital requirements and whether each financial institution will be able to increase dividends and continue share buybacks. The test will review the 34 biggest US banks.
Other than Bank of America (BAC), other biggest US banks' shares increased after the test, as this annual test confirmed the healthy situation of the leading banks.
Among the measured banks, Wells Fargo (NYSE: WFC) & Co had the best results and increased by 7.5% on Friday, while the overall market sentiments also were Okay. The test results show that despite the many frustrations seen in the markets, Banks, by learning from previous crises, have already learned where and how to invest, which can be a good signal for overall markets as well, as they are the hearts of the global economy.
Of course, some banks received warnings, and their share was reduced. Bank of America, Citigroup Inc (NYSE: C), and JPMorgan Chase & Co (NYSE: JPM) received a capital buffer warning. They have to hike their stress capital buffers. They may need to keep dividends flat and eliminate buybacks to overcome this issue. The warning devalued their shares.
Elsewhere, as energy and other products, price reduction decreased the inflation expectations. On Friday, stock markets closed higher and, with two days of continuous growth, closed the week higher. The S&P 500 climbed 3.1% to print the biggest single-day gain since May 2020, while the MSCI global index printed a 4.8% gain to end the three-week loss in a row.
Dow Jones Industrial Average also rose 2.68%, and the Nasdaq Composite added 375.43 points, or 3.34%, to close at 11,607.62.
As mentioned earlier, the primary market mover was the inflation expectations. Investors already lowered their inflation expectations, which has led to the prospect of rising interest rates to about 3.5% by March 2023, down from expectations last week that it would increase to around 4%. As another result of this change of perspective, the US benchmark 10-year yields also lowered to 3.125%, down from 3.498% on June 14, the highest since April 2011.
From a technical point of view, despite the growth on Friday, Wells Fargo's share price could hardly recover above the trend line, and to confirm the bullish trend, we have to see the prices above $45.
