CNBC writes "There's a drawback to the Fed rate cuts the market so craves: It could wreck bank earnings." The article explains, "Traders are begging the Federal Reserve for several rate cuts this year to salvage an economy they see set to slow significantly because of worsening trade disputes. The market cheered this week when Fed Chairman Jerome Powell opened the door to the possibility. But if the central bank did cut rates, a group of important stocks to the market would suffer. Large-cap banks could see their earnings on a per share basis decline by 10%, on average, if the Fed lowers rates by 75 basis points, according to Bank of America Merrill Lynch." It explains, "Bank margins could take a hit if they are paying out deposit rates at a higher level than market rates. Their earnings are also hurt when the spread between short-term and long-term rates flattens, a phenomenon that could worsen if the Fed cuts.... Traders are pricing in a more than 90% chance of a September rate cut and about 60% probability of three rate cuts this year, according to the CME FedWatch tool. Bank of America's economists believe there will be three reductions by early next year. Barclays now also expects a 75 basis point cut this year."

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