NEW YORK (TheStreet) -- Major U.S. banks led the market lower on Monday, which was the seventh day of the partial shutdown of the federal government.
The broad indices all saw declines of nearly 1%, but the KBW Bank Index (I:BKX) saw a much larger decline of 1.7% to 61.93, with all 24 index components down for the session. Big banks seeing shares decline nearly 2% included Bank of America, which closed at $13.81; Citigroup, at $48.19 and Capital One, which closed at $69.93.
The major story this earnings season will be the decline in mortgage lending revenue, as rising long-term interest rates have slowed refinancing applications from their elevated pace. Atlantic Equities analyst Richard Staite on Sept. 23 estimated that the eight large-cap U.S. banks he covers, including the "big four" would see a combined 45% sequential and 55% year-over-year drop in mortgage revenue. Staite also expects the group to see a 20% year-over-year decline in trading revenue.Please see TheStreet's earnings preview for credit card lenders for plenty of detail on what to expect from Capital One and its major competitors.
The Debit Limit BattleAs most investors know, the big battle in Washington between the Republican-controlled House of Representatives and the Democrat-controlled Senate is not limited to an agreement for a fiscal 2014 budget. The government can certainly be run without a budget, if the two houses agree to pass the necessary spending bills. Even more importantly, the government is fast approaching its $16.7 trillion debt limit. U.S. Treasury Secretary Jack Lew in a letter to House Speaker John Boehner (R., Ohio) on Sept. 28 said the "extraordinary measures" the Treasury was taking to maintain its borrowing power will "be exhausted no later than Oct. 17," unless the $16.7 trillion federal debt limit is raised. The House Republicans have passed four spending bills over the last week to keep parts of the government open, but these bills have been rejected by Senate Majority Leader Harry Reid (D., Nev.) because the Republicans continue to insist on tying an eventual full budget agreement to a one-year delay in the implementation of the Affordable Care Act, which is President Obama's signature legislative accomplishment.
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