6 hrs ago
Financial Stocks Fall as AI Concerns and Yield Curve Flatten
Financial stocks are shares in companies that handle money, such as banks and investment firms.
Many of these shares fell on Tuesday.
Investors are worried that artificial intelligence could compete with some financial companies.
They are also watching interest rates and the gap between short-term and long-term bond yields.
That gap became smaller than it has been since March 2025.
A smaller gap can make it harder for banks to earn money from lending.
Some planned IPOs connected to AI data centers have also been delayed.
However, one investment manager said banks still have good long-term prospects.
He pointed to a strong economy, good employment, and solid bank fundamentals.
The S&P 500 Financial index fell 2%, while the S&P 500 bank index dropped 3% on Tuesday.
Charles Schwab declined 6.1%, Ameriprise Financial fell 4.4%, and Raymond James lost more than 3%.
Investors worried that artificial intelligence could disrupt wealth management and traditional financial businesses.
The two-10-year Treasury yield spread reached its narrowest level since March 2025, falling as low as 17.90 basis points.
Analysts cited delayed AI-related IPOs but said strong employment, economic conditions, and bank fundamentals support the sector’s long-term outlook.
- Who
- Financial companies, investors, and analysts including Gabelli Funds portfolio manager Macrae Sykes and Cherry Lane Investments partner Rick Meckler.
- What
- Financial and bank stocks declined as investors assessed AI competition, delayed AI-related IPOs, and a flattening Treasury yield curve.
- Where
- The United States financial and bond markets.
- When
- Tuesday, Sept. 22; the yield-curve move occurred earlier that day.
- Why
- Investors were concerned that AI could disrupt traditional financial businesses and that a flatter yield curve and higher expected Federal Reserve rates could weaken bank returns and economic conditions.
AI and Market Risks
Long-Term Bank Optimism
Impact of artificial intelligence
AI and Market Risks
Investors and Macrae Sykes expressed concern that AI tools, including Meta Platforms’ Muse, could disrupt traditional financial and wealth-management businesses.
Long-Term Bank Optimism
Sykes said the short-term market reaction did not change his firm’s positive long-term view of banks.
Yield-curve flattening
AI and Market Risks
A narrower gap between two- and 10-year Treasury yields could reduce bank returns, while higher expected Federal Reserve rates may slow the economy.
Long-Term Bank Optimism
Rick Meckler noted that rate increases can also reflect a strong economy, and Sykes said current economic and employment conditions remained favorable.
AI-related IPO market
AI and Market Risks
Delays involving SB Energy and the suspension of Holtec’s planned IPO raised concerns about the market for companies connected to AI infrastructure.
Long-Term Bank Optimism
The article presents these IPO developments as short-term market noise rather than evidence that the long-term outlook for banks has deteriorated.
Key facts
- Financial index performance
- The S&P 500 Financial index finished down 2%.
- Bank index performance
- The S&P 500 bank index finished down 3%.
- Largest named decline
- Charles Schwab fell 6.1%.
- Yield-curve spread
- The two-10-year Treasury spread reached as low as 17.90 basis points and was last at 21 basis points.
- Previous yield-curve level
- The spread was 55.5 basis points on Aug. 18.
- IPO developments
- SB Energy postponed its planned roadshow, while Holtec suspended its planned U.S. IPO.
- Long-term outlook
- Macrae Sykes said the outlook for bank stocks remained favorable despite short-term concerns.
Quotes
Macrae Sykes
Portfolio manager at Gabelli Funds who manages investments in the financial industry
“There's worries about AI disruption to traditional businesses. Clearly there's going to be some arguments both around the benefits and the disruption of AI tools and what it all means for the incumbents, but I think today is another sell-without-regard reaction.”
livemint.com
“The short-term noise does not affect our appreciation for the long-term outlook. The outlook in general for banks is pretty good. There's a good economy and good employment. The fundamentals are good.”
livemint.com
Sources
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