2026-10-13

Bank Stocks Just Had Their Worst Month vs. the S&P 500 Since 1990 - Now JPMorgan and Goldman Sachs Have to Answer for It on October 13

Written & reviewed by the TradeSmrt editorial team · 2026-10-13

In this article

What Happened
The Disconnect: Strong Numbers Expected, Weak Stock Prices Already Priced In
What to Take Away From This
FAQ
Sources

What Happened

Four of the largest banks in the United States - JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo - report third-quarter results before Tuesday's opening bell, with Bank of America and Morgan Stanley following Wednesday. Normally, a stretch of big-bank earnings that analysts expect to be strong would lift the sector into the reports. This time, the opposite happened. Going into Tuesday, the Invesco KBW Bank ETF (KBWB) was trading roughly 12-14% below the record high it set in mid-August, even as the S&P 500 notched a fresh all-time closing high just a week earlier. Truist analyst Brian Foran summed up the divergence bluntly in a note that circulated widely among traders: financials had just posted their worst month of relative performance against the S&P 500 since 1990.

The individual numbers tell a consistent story. Over the trailing month, Goldman Sachs shares fell roughly 12%, Wells Fargo dropped about 7%, Citigroup slid around 6.5%, and JPMorgan was down near 6% - a synchronized decline across banks with very different business mixes, which is itself a signal that something macro, not company-specific, is driving the move. Options markets are pricing a comparably wide range of reactions to Tuesday's actual numbers: implied one-day moves of roughly 3.65% for JPMorgan, 4.15% for Citigroup, 4.27% for Goldman Sachs, and as much as 5% for Wells Fargo, according to options-market data compiled by Benzinga. Those are unusually large numbers for a sector whose earnings are, in theory, fairly predictable quarter to quarter.

The Disconnect: Strong Numbers Expected, Weak Stock Prices Already Priced In

What makes this selloff notable is that it isn't built on expectations of bad earnings. Analysts still broadly expect a strong quarter: JPMorgan's consensus adjusted EPS sits near $5.88-5.93, well above the $5.07 it posted a year ago, and S&P 500 earnings as a whole are forecast to grow more than 30% year-over-year for the third quarter. Trading desks, in particular, are expected to have had another excellent quarter given how volatile markets have been since Iran-related oil spikes, tariff announcements, and swings in AI-related tech stocks all hit in the same several months.

So why would bank stocks fall into a quarter they're expected to report well? The answer runs through the bond market rather than the loan book. The 10-year Treasury yield has been grinding toward levels last seen in 2002, touching above 5.3% in early October before settling closer to 5.24%. Rising long-term yields hurt bank stocks through three separate channels even when current-quarter trading revenue looks strong. First, banks hold large portfolios of Treasuries and mortgage-backed securities bought when rates were lower; as yields rise, the market value of those older, lower-yielding bonds falls, creating unrealized losses that investors price in immediately even though they don't hit the income statement unless the bonds are sold - the same dynamic that sank Silicon Valley Bank in 2023 and that investors now flag reflexively whenever yields move sharply. Second, depositors chase higher yields elsewhere, forcing banks to raise what they pay on deposits and squeezing net interest margins. Third, higher borrowing costs for mortgages and corporate loans threaten to slow the loan growth that is supposed to offset margin pressure. In short, investors are selling the stocks today based on a rate environment they expect to weigh on results several quarters from now, even if Tuesday's actual trading and dealmaking numbers come in strong.

Not every strategist agrees the selloff is justified. Analysts at firms including MAI Capital and RBC have argued publicly that the drop looks more like an overreaction to rate anxiety than a verdict on the banks' underlying business, pointing to continued strength in trading, deal fees, and consumer credit quality as reasons the group could be due for a bounce once the earnings calendar clears.

What to Take Away From This

A stock can fall into earnings even when the earnings themselves are expected to be good. Markets price in forward risk - here, the path of long-term interest rates - that has little to do with the specific quarter being reported, so "strong expected EPS" and "falling stock price" aren't actually a contradiction.
Watch for synchronized sector moves as a tell. When JPMorgan, Goldman, Citigroup, and Wells Fargo - four banks with different business mixes - all fell by similar magnitudes over the same month, that points to a macro driver (yields) rather than a company-specific problem at any single one.
Large implied options moves heading into earnings reflect genuine uncertainty, not just hype. A 4-5% one-day implied move on a megabank is unusually wide; it tells you the market itself doesn't have high confidence in which way the stock reacts, which is useful information independent of your own view.
History offers a mixed verdict on fading this kind of selloff. In most recent earnings seasons since 2023, bank stocks have recovered in the days following the kickoff reports; the one notable exception came in a quarter that, like this one, featured a sharp spike in Treasury yields - a reminder that the rate backdrop, not just the earnings, decides how a rebound plays out.

FAQ

If bank earnings are expected to be strong, why are the stocks falling instead of rising?

Stock prices move on forward expectations, not just the current quarter. Investors are discounting the risk that a 24-year-high Treasury yield will squeeze net interest margins and slow loan growth in future quarters, even if the quarter being reported on Tuesday turns out to be strong. The sector's year-over-year earnings growth can still be excellent while the stock price falls on worries about what comes next.

What does an "implied move" of 4-5% actually mean?

It's a figure derived from options prices that reflects how large a one-day price swing, in either direction, the options market is pricing in around an earnings release. A larger implied move signals that traders expect - or are at least hedging against - more uncertainty than usual, whether the result turns out to be a beat or a miss.

Could this selloff reverse quickly if the earnings beat expectations?

It's possible. Big-bank stocks have historically tended to recover in the two weeks following the start of earnings season in most years since 2023. But the one exception during that stretch happened to also coincide with a sharp jump in long-term bond yields - which is exactly the condition in place right now - so a clean earnings beat alone may not be enough to reverse the trend unless Treasury yields cooperate as well.

Sources

This article is an original synthesis and analysis based on the reporting below; it does not reproduce any source's text. Please check the source articles directly for the most current figures.

This article is for informational and educational purposes only and does not constitute investment advice. All investments carry risk, including the potential loss of principal. Past performance and historical patterns do not guarantee future results. Always do your own research and consult a licensed financial advisor before making investment decisions.