Banks stocks hit hard as continued fall in Treasury yields fuel recession fears

Financial stocks traded broadly lower Tuesday, as longer-term Treasury yields continued to fall amid growing concerns that a recession was on the horizon. Lower longer-term yields can weigh on banking profits, as they narrow the spread between what banks earn on longer-term assets, such as loans, that are funded by shorter-term liabilities. The SPDR Financial Select Sector ETF XLF, -0.94% slid 1.5% in afternoon trading, with 56 of 66 equity components losing ground, to outpace the S&P 500’s SPX, -0.35% 0.9% decline. Among the ETF’s more-active components, shares of Bank of America Corp. BAC, -1.96% declined 2.4%, Citigroup Inc. C, -1.05% shed 1.7%, Wells Fargo & Co. WFC, -0.16% dropped 0.9% and JPMorgan Chase & Co. JPM, -0.96% gave up 1.5%. The most-active of the gainers was Synchrony Financial’s stock SYF, +0.91%, which gained 0.6%. Meanwhile, the yield on the 10-year Treasury note TMUBMUSD10Y, 2.817% fell 8.7 basis points (0.087 percentage points) to 2.802%, and have lost 40.4 basis points amid a four-day losing streak. The yield briefly fell below the 2-year Treasury yield TMUBMUSD02Y, 2.828%, something known as a yield-curve inversion, which often foretells an economic recession.