Extra credit trading
- SYF fell 8.4% on Monday and 2% on Tuesday
- Move followed proposed cap on credit card fees
- Heavy options volume on Tuesday, skewed toward calls
Just before big banks were scheduled to kick off a new earnings season, the financial sector got an unwelcome surprise in the form of the White House’s proposed 10% cap on credit card interest rates.
Not surprisingly, financials were the weakest S&P 500 (SPX) sector on Monday. Synchrony Financial’s (SYF) 8.4% sell-off was typical of many stocks in the credit card business:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
It was the sharpest downturn since last April for the stock, which rallied 90% off its April lows to gain around 28% in 2025, and hit a record intraday high as recently as last Friday. Shares stabilized a bit on Tuesday, but still slipped another 2%.
While Morgan Stanley & Co. strategists think such a cap could actually reduce access to credit and crimp consumer spending—because fewer companies would be willing to offer credit—they also see it as a low-probability event, at least as currently outlined.1
While the story is evolving and unpredictable, Tuesday’s calmer price action suggests possible parallels to last week’s price action in defense stocks. Many of these names sold off after the President said they shouldn’t be allowed to issue dividends or engage in stock buybacks. But most of them, including Northrop Grumman (NOC), Lockheed Martin (LMT), and RTX (RXT), had rebounded and hit fresh highs by Tuesday.
Despite trading lower on Tuesday, SYF’s options activity suggested that some traders may have been exploring upside potential. Total options volume was around 15 times average around midday:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
However, it was higher in calls (17 times average) than puts (11 times average), with one noticeable large trade: 6,300 contracts in the February $85 calls. Given this strike price was roughly 8% above the stock price, it’s possible that the buyers of these options anticipated a potential bounce sometime before the options expired.
Today’s numbers include (all times ET): Mortgage Applications (7 a.m.), PPI (8:30 a.m.), Retail Sales (8:30 a.m.), Current Account (8:30 a.m.), Existing Home Sales (10 a.m.), Business Inventories (10 a.m.), EIA Petroleum Status Report (10:30 a.m.).
Today’s earnings include: Bank of America (BAC), Citigroup (C), H.B. Fuller (FUL), J.B. Hunt Transport (JBHT), Wells Fargo (WFC).
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1 MorganStanley.com. Macro implications of potential cap on credit card APRs. 1/12/26.