- Goldman, JPMorgan stocks advance 2% on Wednesday.
- US regulators are looking into lowering a key capital ratio that would help big banks.
- FOMC to release interest rate decision at 14:00 EST.
- RSIs for GS, JPM stocks make both look overbought on technical charts.
Goldman Sachs (GS) and JPMorgan (JPM) are both outperforming the market on Wednesday morning ahead of the afternoon US interest rate decision by the Federal Reserve (Fed). JPMorgan and Goldman Sachs stock prices have risen 2.7% and 2.0%, respectively, at the time of writing. The Dow Jones Industrial Average (DJIA), which contains both, as well as the NASDAQ and S&P500, all encircle 0.4% advances.
At 14:00 EST (18:00 GMT), the Fed’s Federal Open Market Committee (FOMC) will release its determination on the fed funds rate, which has been stuck at 4.25%-4.50% all year. The market heavily expects the central bank to once again hold rates steady, but is eager to see how its dot plot foresees future rate decisions.
The article also said that the 6% rate for subsidiaries of the bank holding companies might also be lowered to the same range.
The banks are also rising based on optimism surrounding the US government leaning toward reducing capital requirements for trading US Treasury bonds.
Goldman Sachs, JPMorgan to benefit from reduced capital requirements
The Federal Deposit Insurance Corporation, the Fed, and the Office of the Comptroller of the Currency — the three major banking regulators in the US government — are discussing altering the 5% capital requirement that banks must maintain in order to invest in US Treasuries.
Called the enhanced supplementary leverage ratio or eSLR, according to reports from Bloomberg, the rule change could lower that 5% ratio to between 3.5% and 4.5%. This would then make Treasury investment more lucrative for the banks, likely creating heavier demand for them and thus lowering coupon rates.
The regulators will meet on June 25 to discuss the matter, but investors already think it has a high likelihood of passing. The Fed’s vice chair for supervision, Michelle Bowman, has highlighted the capital ratio as excessive earlier this year.
However, some other critics named in the Bloomberg article state that when the capital requirement was waived during the Covid 19 crisis in 2020, banks did not take advantage of the rule change to increase their Treasury holdings.
JPMorgan, Goldman Sachs stock charts
Goldman stock has been rising steadily since the early April tariff lows. Support sits much lower in the $560s and $570s based on moving averages. The bank will require another major push from bulls to retest its all-time high, the low $670s.
However, the Relative Strength Index (RSI) is nearing overbought territory and may require a period of consolidation.
GS daily stock chart
JPMorgan stock is already right near its all-time high from February. It would seem that it is too close not to attempt a new high at this region. The 50-day and 200-day Simple Moving Averages (SMAs) sit close by between $242 and $254, but its RSI reading of 69 makes the stock look overbought and doesn’t provide a good entry point here.
