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Bank stocks led a sell-off on Wall Street on Wednesday as fourth-quarter earnings season kicked off with disappointing results from some of the biggest US lenders.
Wall Street’s blue-chip S&P 500 fell 0.9 per cent in morning trade in New York, on track for its worst daily decline since mid-December.
Wells Fargo and Citigroup were among the worst performers, down 4 per cent and 3.4 per cent respectively. Citi reported a 13 per cent profit decline in the fourth quarter even as revenue rose 2 per cent year on year. Wells Fargo reported lower-than-expected net income.
JPMorgan Chase on Tuesday reported a 7 per cent profit decline in the final quarter of 2025 due to an unexpected drop in investment banking revenues and an increase in the reserves set aside for possible loan losses.
Bank stocks had already come under pressure following President Donald Trump’s call last Friday for credit card interest rates to be capped at 10 per cent.
“Investors have got used to banks kicking off earnings season with solid results. This time around the uncertainty around the threatened credit card interest rate cap has soured the mood going into bank earnings,” said Arun Sai, a multi-asset strategist at Pictet Asset Management.
America’s six largest banks added $600bn in market value last year, spurred on by the Trump administration’s push to deregulate the industry.
Deregulation could potentially unlock $2.6tn in lending capacity across the US, according to Jim Caron, chief investment officer at Morgan Stanley Investment Management.
Tech stocks also came under pressure on Wednesday, pulling the tech-heavy Nasdaq Composite down 1.3 per cent.
Shares in digital advertising group AppLovin — one of last year’s best performing stocks — dropped 10 per cent, while semiconductor group Broadcom fell 5.2 per cent.
US stocks trailed major European and Asian indices last year as concerns about lofty tech valuations and the Trump administration’s tariff policies weighed on broad swaths of the S&P 500.
That trend has continued into 2026, with the Stoxx Europe 600 up more than 3 per cent over the past two weeks compared with the S&P’s 0.5 per cent gain over the same period.
Wednesday’s decline followed a more muted reaction to US inflation data the previous day, which showed that consumer price growth held steady at 2.7 per cent in December. Trump pointed to the figures as he repeated his calls for the Federal Reserve to slash borrowing costs and intensified his criticism of the central bank’s chair, Jay Powell.
US prosecutors on Sunday launched a criminal investigation into Powell over a $2.5bn renovation of the Fed’s headquarters. Powell strongly rejected the “unprecedented action” from the DoJ.
Benjamin Jones, global head of research at Invesco, described the DoJ’s actions as “spectacle and distraction”.