Fed and Big Banks Weigh on the Stock Market Today

Economic reports and comments from the Federal Reserve did little to help stock markets today. ADP said private-sector employment only rose 119,000 in April, down from 131,000 in March and below the 150,000-job estimate. The ISM Purchasing Managers Index, which is intended to measure whether the economy is expanding or contracting, dropped from 51.3% a month ago to 50.7%, indicating only modest growth. Add in the Fed's decision to maintain current monetary policy due to weak economic growth, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is falling 0.79% near the end of trading today, while the S&P 500 (SNPINDEX: ^GSPC  ) is down 0.78%. 

The economic news hurt bank stocks, but that's not all that's dragging Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) lower today. The Financial Times is reporting that the Federal Reserve is considering raising capital requirements for banks -- potentially even higher than Basel III requirements. Congress is reportedly pressuring the Fed to raise capital requirements on big banks, and the FDIC board and Office of the Comptroller of the Currency are on board as well. Higher capital requirements are probably good for the economy because they reduce failure risk, but they would also reduce leverage, which banks use to make a profit. That's why Bank of America and JPMorgan are both down today.

With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, check out The Motley Fool's premium research report on the company. Click here now for instant access!

Merck (NYSE: MRK  ) has lost the most value on the Dow, falling 2.8% after reporting first-quarter results. Earnings per share came in at $0.85, $0.06 ahead of estimates, but revenue dropped 9% to $10.7 billion -- a much larger drop than investors had expected. Both Merck and Pfizer are fighting with patent expirations and don't have a backlog of new products to replace those that are going generic. For Merck, the big loss is Singulair, which saw sales drop by more than 75% in the quarter.

The only significant gain on the Dow was made by AT&T, which is up 0.7%. There's little news out on the company, but competitor T-Mobile did have a good first day on the stock market today. The stock is up 5% in its debut, and now all four major mobile carriers are publicly traded. 

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Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
^GSPC $2151.13 Down -20.24 -0.93%
S&P 500 INDEX CAPS Rating: No stars
BAC $15.16 Down -0.22 -1.43%
Bank of America CAPS Rating: ****
JPM $65.65 Down -1.06 -1.59%
JPMorgan Chase CAPS Rating: ****
MRK $61.91 Down -1.39 -2.20%
Merck and Co. CAPS Rating: ****