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Pre-Market Primer: The Winners and Losers of the Fed's Stress Tests


Fifteen out of 19 banks passed. Dividends and stock buybacks are in the cards for some.

The Fed released the results of its stress tests yesterday afternoon. The central bank said yesterday that 15 out of the 19 banks that they tested will be able to keep their heads above water even in the worst situations and avoid systemic risk. The banks that tested should be able to maintain capital ratios in a theoretical economic collapse with 13% unemployment and a 50% stock market decline, while still paying out dividends.

JPMorgan Chase (JPM), US Bancorp (USB), BB&T (BBT), American Express (AXP), and Wells Fargo (WFC) will all raise dividends. Morgan Stanley (MS) will acquire another 14% of Smith Barney.

State Street (STT), Bank of America (BAC), Goldman Sachs (GS), Bank of NY Mellon (BK) Capital One (COF), PNC Financial (PNC), Regions Financial (RF), Key Corp (KEY), and Fifth Third (FITB) also passed the Fed's test.

Citigroup (C), Ally Financial (ALLY-PB), Sun Trust (STI), and MetLife (MET) all came up short. In after-hours trading, Sun Trust and Metlife fell 3.68% and 3.83%, respectively. Citi dropped 4.20%.

With the Greek nightmare more or less behind us, European markets are enjoying a second straight day of gains. Fitch actually upgraded Greece out of default status yesterday.

US stock futures are virtually unchanged this morning.
  • Dow (^DJI) futures rose 0.05%% to 13,116.00.
  • S&P 500 (SPY) futures ticked down 0.04% to 1,390.20.
  • Nasdaq (^IXIC) futures fell 0.06% to 2,692.50.
The Federal Trade Commission subpoenaed Apple (AAPL) in an anti-trust investigation over Apple's inclusion of Google (GOOG) in iOS as the default browser. Search rivals such as Microsoft's (MSFT) Bing consider this to be anti-competitive behavior. Google dominates virtually all mobile search. Though Apple and Google are well-known rivals, the two companies are very closely related. Google's Chairman Eric Schmidt serves on Apple's board of directors.

Greg Smith, a banker at Goldman Sachs, left the bank in the ultimate blaze of glory, slamming the vampire squid with a scathing op-ed in the New York Times. He said that he quit because the culture has changed and clients' interests are no longer observed.

"I can honestly say that the environment now is as toxic and destructive as I have ever seen it," he said.

Twitter: @vincent_trivett
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No positions in stocks mentioned.
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