American Express, Capital One Shares Fall

NEW YORK (TheStreet) -- American Express(AXP), Capital One (COF) and Discover Financial Services (DFS) shares plummeted on heavy volume Friday as analysts fretted about the quality of earnings growth in the sector.

Trading in the credit card issuers saw massive spikes in volume on Friday, which could have been a combination of profit-taking as both American Express and Capital One reported better-than-expected fourth quarter results late Thursday. But it also could have been a sign that investors are worried about each of the company's ability to produce meaningful earnings going forward as the weak economy persists and regulatory changes to the credit card business inhibit firms' ability to grow. Analysts were finger-pointing in follow up research notes on Friday that both companies boosted earnings by the ability to lower loan loss provisions as opposed to true earnings growth.

Capital One's stock was hardest hit on Friday. It dropped more than 12% before settling at $37.53. More than 22 million shares traded hands, up from a three-month average of 6.3 million shares.

American Express shares fell 8.5% to $38.59. More than 26 million shares traded hands on Friday, more than double the nearly 11 million shares traded as a three-month daily average.

Discover Financial shares fell more than 5.4% to $13.46 on Friday. Discover also had double the average trading volume in the stock on Friday.

"We do believe that the tone of both management teams was cautiously optimistic. However, both companies conceded that the macro environment, while possibly better than 2009, would remain challenged," wrote Keefe, Bruyette & Woods analyst Sanjay Sakhrani. "In addition to this phenomenon, both companies must also contend with continued regulatory risks as well as the implementation of the CARD Act."