Aurelia Butler

WASHINGTON (Reuters) -U.S. House of Representatives Republicans aim to release a stopgap measure to avert a partial government shutdown on Saturday, the morning after the Moody’s (NYSE:MCO) credit agency lowered its outlook on the government’s credit ratings to “negative.”A knowledgeable source, who spoke on condition of anonymity, said plans for the release of the continuing resolution, or “CR,” were still in flux. It was also unclear what form the measure would take. U.S. House Speaker Mike Johnson has spent days in talks with members of his slim 221-212 Republican majority about several CR options. The Republican-controlled House and Democratic-led Senate must agree on a vehicle that President Joe Biden can sign into law before current funding expires on Nov. 17. Moody’s cited political polarization in Congress as a factor in making its decision to lower the credit outlook, saying Washington may not be able to reach agreement to make its growing deficits more affordable.The U.S. recorded a $1.7 trillion deficit last year – the largest outside of the worst of the COVID-19 pandemic – and rising interest rates mean that the cost of servicing that debt will continue to grow.Just a few months ago, Congress brought the U.S. to the brink of defaulting on its more than $31 trillion in debt, a move that would have shaken world financial markets.With a potential shutdown only days away, some Republicans have called for a “clean” CR that would run to mid-January and have no spending cuts or conservative policy riders that Democrats oppose. But hardline conservatives continue to press for a measure with spending cuts, policies including tighter security at the U.S.-Mexico border and an unorthodox structure with staggered deadlines for different segments of the federal budget.Many lawmakers warn that a prolonged partisan fight over a stopgap measure could prevent Congress from averting a shutdown. As House Republicans debated their options this week, Senate Majority Leader Chuck Schumer took an initial procedural step toward moving his own stopgap measure. More

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NEW YORK (Reuters) – Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector’s problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and several other lenders in the worst banking crisis since 2008. The broader S&P 500, by contrast, is up around 15%.Bank stocks are at an all-time low compared with the S&P 500 based on relative prices, according to data from BofA Global Research. That tumble has made their valuations attractive to some investors: the sector trades at eight times forward earnings, less than half of the 19.7 valuation of the S&P 500. “Right now, you can’t say for sure whether the attractive valuations are merely a value trap,” said Quincy Krosby, chief global strategist at LPL Financial (NASDAQ:LPLA), referring to a term describing stocks that are cheap for good reason.One key factor for bank stocks is whether the Federal Reserve is close to wrapping up a monetary tightening cycle that has brought the highest U.S. interest rates in decades. Elevated rates allow lenders to charge customers higher interest. But they also increase the allure of short-term bonds and other yield-generating investments over savings accounts, while hurting demand for mortgages and consumer lending.Few investors believe more rate increases are in store. Yet signs the Fed may keep rates around current levels through most of next year have weighed on bank stocks. Nevertheless, some contrarian investors appear to be moving into the sector: the Financial Select Sector SPDR Fund received net inflows of $694.59 million in the week ending on Wednesday, its best weekly showing in more than three months. This month, analysts at BofA Global Research said investors should “selectively” add exposure to bank stocks in anticipation of an interest rate peak. Most risks to the sector stem from higher rates, they said, including margin pressure due to rising deposit costs and problems with commercial real estate. Famed investor Bill Gross said last week he believed the sector had hit bottom and added he was holding a number of regional bank stocks, fueling sharp rallies in their shares. “We think there is a lot of hidden value in banks if you are selective,” said Neville Javeri, a portfolio manager at Allspring Global Investments who is overweight banks relative to the S&P 500 in the portfolios he manages. Javeri believes larger banks have significantly cut costs and are poised to raise dividends and increase buybacks, helping them weather a period of slower loan growth.Among stocks recommended by BofA’s analysts are shares of Goldman Sachs and Fifth Third Bancorp (NASDAQ:FITB). Investors are awaiting U.S. consumer price data next week, for a glimpse of how the Fed is faring in its fight to keep lowering inflation from last year’s multi-decade highs. A sharper than expected fall could bolster the case for the central bank to cut rates sooner. Many investors and analysts remain pessimistic on bank stocks.Historically high mortgage rates have weighed on lending. Overall, about 61% of all outstanding mortgages have an interest rate below 4%, according to the Apollo Group, leaving consumers little incentive to refinance or move. The average contract rate on a 30-year fixed-rate mortgage dropped in the week ended Nov. 3 by a quarter percentage point to 7.61%, the lowest in about a month.Meanwhile, analysts have been cutting growth estimates for financials, which includes not only banks but insurance companies, as the Fed maintains it will keep rates higher for longer. This could hurt mortgage loan growth. The financial sector is expected to post earnings growth of 6.2% in 2024, nearly half of prior estimates from April that showed 11.4% earnings growth, according to LSEG data. “You don’t have any certainty that you’ve seen the worst of it and things are getting better,” said Jeff Muhlenkamp, lead portfolio manager at Muhlenkamp & Company. More