Capital One (COF) stock witnessed its largest single-day declines in nine months on Jan. 12 after President Donald Trump proposed a one-year cap on credit card interest rates at 10%. On Truth Social, Trump said the policy shift will take effect next week on Jan. 20, making investors bail on COF as it threatens the firm’s most profitable revenue stream. More News from Barchart Despite Monday’s decline, however, Capital One shares remain up some 60% versus its 52-week low. www.barchart.com Capital One ...

President Donald Trump’s proposal to impose a one-year 10% cap on credit card interest rates is being met with indifference on Wall Street, according to TV host Jim Cramer.Wall Street ‘Doesn’t Seem To Care’Cramer said Trump has “decided that credit card companies will have to cap rates at 10% for a year,” while noting that the move requires Congressional approval, on CNBC’s “Mad Money” on Monday.“Congress would need to pass actual legislation to make that happen,” Cramer said, while suggesting that Trump co ...

Group 1 - The proposed 10% credit card interest rate cap by President Trump could significantly impact the banking sector and extend to consumer-related industries such as airlines and retail, potentially forcing consumers to seek higher-cost borrowing options [1][2] - Issuing banks may adopt multiple strategies to mitigate the pressure from the interest rate cap, including increasing fees, reducing consumer rewards, cutting operational expenses, and tightening credit limits, especially if the policy becomes permanent [1][2] - There is considerable doubt about the feasibility of implementing this cap, as previous attempts have failed, and analysts suggest that legislative action from Congress may be required [2][3] Group 2 - Analysts from Morgan Stanley predict that credit card companies' book values could suffer significant declines, with potential drops of 20% to 40% for certain firms under the temporary cap [3][4] - The impact on earnings per share for major credit card issuers could be severe, with estimates suggesting a 10% decline for Citigroup by 2026, while other banks like JPMorgan Chase and Bank of America may see smaller impacts ranging from -1% to -4% [2][3] - The stock market has already reacted to these risks, with companies that have a higher proportion of low-score borrowers experiencing the largest declines in stock prices [4]

Core Viewpoint - The proposed 10% cap on credit card interest rates by President Trump could significantly impact the banking sector and extend to consumer-related industries such as airlines and retail, potentially forcing consumers to seek higher-cost borrowing alternatives [1][2] Group 1: Impact on Credit Card Issuers - Credit card issuers may respond to the interest rate cap by increasing fees, reducing consumer rewards, cutting operational costs, and tightening credit limits, especially if the cap becomes permanent [1][2] - Analysts from Morgan Stanley predict that under the temporary cap, the book value of companies like Bread Financial, Synchrony Financial, and American Express could decline by 20% to 40% [3] - The impact on earnings per share for major credit card companies could be severe, with estimates suggesting a reduction of 80% for American Express and 60% for Citigroup [3] Group 2: Broader Economic Implications - The credit card industry is crucial to the U.S. economy, which is approximately 70% driven by consumer spending, with credit card spending accounting for just over 20% [2] - A tightening of credit by issuers could lead consumers to turn to less regulated and more expensive lending options, such as payday loans [1][2] - The potential for reduced credit availability could have a cascading effect on industries reliant on credit card revenue, particularly airlines and retail [2] Group 3: Market Reactions - Stock prices of companies with a higher proportion of low-credit borrowers have already begun to reflect the risks, with significant declines observed in shares of Bread Financial, Synchrony Financial, and others [4] - Major banks like Citigroup and JPMorgan also experienced stock price drops, indicating market concerns over the proposed policy's implications [4] - Analysts note that while the event's impact is broad, the likelihood of the cap being implemented remains low, but uncertainty in the industry has increased significantly [4]

Core Viewpoint - Capital One is set to pay $425 million and implement higher interest rates for certain accounts to settle a class action lawsuit regarding misleading interest rate promises to depositors [1][3]. Settlement Details - The revised settlement includes an additional $530 million in higher interest rates for depositors with 360 Savings accounts, alongside the initial $425 million payment [3]. - The initial proposed settlement of $425 million was rejected by a federal judge, who deemed it insufficient and ordered further negotiations [5]. Legal Context - Customers accused Capital One of falsely advertising high interest rates on 360 Savings accounts while offering better rates to new customers on 360 Performance Savings accounts [3][4]. - A coalition of 18 state attorneys general opposed the earlier settlement, arguing it would not adequately compensate Capital One customers [4]. Judicial Response - The federal judge criticized the initial settlement for providing less than 10% of the damages to 360 Savings depositors, who were earning significantly lower interest compared to 360 Performance Savings customers [5]. - The judge's ruling prompted both parties to renegotiate the terms of the settlement to address the concerns raised [5]. Attorney General's Statement - New York Attorney General Letitia James expressed approval of the new settlement, stating it delivers justice and ensures customers receive the promised higher interest rates [6].

Core Insights - President Trump proposed capping credit card interest rates at 10% for one year, citing that current rates of 20% to 30% are unfair to consumers [1][5] - The implementation details of this cap remain unclear, raising questions about its feasibility and duration [5] Stock Market Impact - Capital One Financial (COF) shares fell over 6%, American Express (AXP) dropped 4%, and Citigroup (C) decreased by 3% following the announcement [2] - Other major banks like JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC) saw declines of about 1%, while Synchrony Financial (SYF) experienced an over 8% drop [2] Consumer and Industry Implications - Capping interest rates may reduce borrowing costs for consumers but could negatively affect credit card issuers [3] - The upcoming earnings season for major banks, starting with JPMorgan, will provide executives an opportunity to address the potential impacts of this proposed cap [3] Regulatory Context - Financial stocks are also reacting to concerns regarding the Trump administration's pressure on the Federal Reserve, particularly after Fed Chair Jerome Powell mentioned a grand jury investigation into his previous testimony [4] - The investigation is perceived as politically motivated, occurring after the Fed did not lower rates as quickly as the administration desired [4]

Core Viewpoint - The U.S. financial sector experienced a significant decline following President Trump's call for a 10% cap on credit card interest rates, raising concerns about the profitability of banks and credit card companies [1][2] Group 1: Impact on Credit Card Companies - Credit card-related stocks saw notable declines, with Bread Financial (BFH.US) dropping over 10%, Synchrony Financial (SYF.US) down more than 8%, and First Capital Credit (COF.US) falling over 6.4% [1] - Analysts indicated that the proposed interest rate cap would directly compress the credit card spread, challenging business models that rely on high rates to cover risk costs [1] - If the 10% cap is implemented, credit card businesses could face overall losses, particularly affecting subprime credit cards [2] Group 2: Impact on Large Banks - Major banks such as Bank of America (BAC.US), Citigroup (C.US), and JPMorgan Chase (JPM.US), which have significant exposure to credit card operations, also saw their stock prices decline [1] - Analysts noted that Citigroup has the highest exposure in credit card business, followed by JPMorgan Chase, which was reflected in their stock performance [2] - The financial sector is expected to remain volatile in the short term, with future movements dependent on the likelihood of Trump's affordability proposal advancing in Congress [2]

Core Viewpoint - US stock market indices, including the Dow Jones and S&P 500, reached historical highs despite a criminal investigation into Federal Reserve Chairman Jerome Powell by the US Department of Justice. President Trump has called for a cap on credit card interest rates at 10% [1][7]. Market Performance - The Dow Jones increased by 86.13 points (0.17%) to 49,590.20, the Nasdaq rose by 62.56 points (0.26%) to 23,733.90, and the S&P 500 gained 10.99 points (0.16%) to 6,977.27. During the session, the Dow reached a peak of 49,633.35 and the S&P 500 hit 6,986.33, both marking intraday historical highs [3][9]. - The market opened lower but rebounded, driven by gains in Walmart and certain tech stocks, recovering from a drop of nearly 500 points in the Dow [3][9]. Sector Movements - Bank stocks generally declined, with Citigroup down 3%, JPMorgan and Bank of America each down about 2%, and Capital One falling 6%. This was influenced by Trump's statement that financial institutions failing to comply with the proposed credit card interest rate cap could face legal consequences [10]. - Walmart's stock rose by 2% due to optimism about its inclusion in the popular Invesco QQQ Trust ETF, which tracks the Nasdaq 100 index. This retail giant led gains in the consumer sector, which may benefit from Trump's push to lower credit card rates and rising oil prices [12]. Economic Indicators - Market focus is shifting towards the upcoming Consumer Price Index (CPI) data, with expectations that it may come in below 3%. Analysts suggest that the overall economic growth is strong, contributing to positive market sentiment [5][11]. - There is a general expectation that the Federal Reserve will pause further interest rate cuts in its upcoming meeting to assess inflation trends and economic developments [11]. Analyst Insights - Rob Williams, Chief Investment Strategist at Sage, downplayed the significance of the investigation into Powell, suggesting it is merely noise and that the focus should remain on economic data [10]. - Jim Lebenthal, Chief Market Strategist at Cerity Partners, indicated that the investigation's impact on interest rates and inflation is likely to be long-term rather than immediate. He noted that favorable market conditions and anticipated strong earnings reports are supporting market growth [11]. Stock Ratings - Palantir's stock rose by 1% following an upgrade from Citigroup, contributing to a positive trend in some tech stocks, including AMD and Oracle [13].

Capital One Finance has agreed to pay $425 million over claims it misled consumers about a high-yield savings program. ...

A federal judge granted preliminary approval on Monday to Capital One's revised $425 million class action settlement with depositors who said they were cheated out of high interest rates, two months after rejecting an earlier accord, New York Attorney General Letitia James said. ...