[New York Stock Exchange] Broad Weakness on Credit Card Interest Rate Cap... Financial Stocks Plunge

Financial Stocks Hit Hard by Push for 10% Cap on Credit Card Interest Rates
Core CPI Rises 2.6% Year-on-Year in December
Rate Freeze Expected in January Despite Easing Inflation Outlook
International Oil Prices Jump Over 2%
U.S. Signals Possib

On January 13 (local time), all three major U.S. stock indices closed lower. Financial stocks, including JPMorgan, plummeted after President Donald Trump hinted at introducing a cap on credit card interest rates, which dragged down the overall indices. Although last month’s inflation data came in below market expectations, it was not enough to change the outlook for a rate freeze this month.

Traders are working on the floor of the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News Agency

On the New York Stock Exchange that day, the blue-chip Dow Jones Industrial Average closed at 49,191.99, down 398.21 points (0.8%) from the previous session. The large-cap S&P 500 Index fell 13.53 points (0.19%) to 6,963.74, while the tech-heavy Nasdaq Index ended at 23,709.873, down 24.032 points (0.1%).

By sector, financial stocks were generally weak. Despite JPMorgan reporting fourth-quarter earnings that exceeded market expectations, its stock plunged 4.18%. Goldman Sachs and Mastercard dropped 1.2% and 3.76%, respectively. In contrast, Alphabet, Google’s parent company, which surpassed a $4 trillion market capitalization the previous day, continued its strong performance, rising more than 1%.

The weakness in financial stocks was driven by President Trump’s proposed policy to cap credit card interest rates. On this day, Jeremy Barnum, Chief Financial Officer (CFO) of JPMorgan, suggested the possibility of legal action regarding a plan to cap credit card interest rates at 10% for one year. He warned that such a policy could negatively impact consumers, especially those with lower credit scores.

This move is seen as an extension of President Trump’s recently announced price control policies. On January 7, he stated that he would not allow defense companies to pay dividends or repurchase shares until they expand investment in production and research and development (R&D). He also mentioned plans to ban large institutional investors from purchasing single-family homes to stabilize housing prices.

Tim Holland, Chief Investment Officer (CIO) at Orion, commented, “It is questionable whether the administration can push through such changes without congressional intervention or approval,” adding, “The future course of these policies is unclear.”

U.S. inflationary pressures appeared to have eased somewhat. According to the Department of Labor, the Consumer Price Index (CPI) for December of last year rose 2.7% year-on-year, matching both the previous month’s figure and expert forecasts. The core CPI, which excludes volatile energy and food prices, increased 2.6% year-on-year, remaining at the previous month’s level and slightly below the market expectation of 2.7%.

However, the market’s outlook for a rate freeze in January remained unchanged. This is because the Federal Reserve’s monetary policy decisions are complicated by the need to prioritize between price stability and a slowing labor market.

Seema Shah, Chief Global Strategist at Principal Asset Management, explained, “The lower-than-expected core CPI released today is unlikely to significantly alter the Fed’s decision at the January meeting. The unemployment rate remains low, growth is above trend, and fiscal stimulus is supporting the economy.” She added, “Since inflation is still above target, the Fed may choose to hold the policy rate steady at this month’s meeting and in several upcoming meetings.”

The market is also paying close attention to earnings announcements from major financial institutions. This week, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley are scheduled to release their results.

Additionally, as the U.S. Department of Justice has launched an investigation into Federal Reserve Chair Jerome Powell over allegations of excessive spending on Fed building construction, debates over central bank independence have emerged as another factor contributing to stock market volatility.

Yields on U.S. Treasury bonds were slightly weaker, particularly for short-term maturities. The benchmark 10-year Treasury yield, which serves as a global bond market reference, stood at 4.17%, unchanged from the previous day. The 2-year Treasury yield, which is sensitive to monetary policy, fell by 2 basis points (1bp=0.01 percentage point) to 3.52%.

International oil prices surged by more than 2%. On the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude rose 2.8% from the previous session to close at $61.15 per barrel. Brent crude, the global oil price benchmark, finished at $65.47 per barrel, up 2.5% from the previous day. President Trump’s remarks that “a helping hand is reaching out” to anti-government protesters in Iran and his call for state agencies to take control were interpreted as signaling possible military intervention against Iran, which heightened geopolitical risks and contributed to the rise in oil prices.