U.S. Bancorp Plunges 2.42%—Is This the Start of a Sector-Wide Retreat?

Summary
• U.S. Bancorp (USB) tumbles 2.79% to $43.705 amid Q2 earnings disappointment
• Intraday swing sees stock drop from $44.545 high to $43.46 low
• Dividend hike and buyback program fail to offset weak revenue performance
• Citigroup (C) outperforms sector with 7.1% gain since Q2 earnings

U.S. Bancorp’s sharp intraday decline has sent shockwaves through the diversified banks sector, with the stock trading nearly 3% below its opening price. The sell-off follows a Q2 earnings report that missed revenue estimates by 0.7% and revealed a 59.2% efficiency ratio, sparking concerns over operating leverage. With the stock near its 52-week low of $35.18, investors are debating whether this is a buying opportunity or a warning sign for the broader banking sector.

Q2 Earnings Miss Sparks Sell-Off
U.S. Bancorp’s Q2 earnings report delivered a harsh reality check for bulls. Despite a 2% year-on-year revenue increase to $6.98 billion, the bank fell short of analyst expectations by 0.7%, missing both net interest income and tangible book value per share estimates. The stock’s 1.6% post-earnings decline accelerated into a 2.79% drop as investors reacted to weak operating leverage and a 59.2% efficiency ratio. While the bank’s 18% return on tangible common equity is strong, it couldn’t offset concerns over fintech competition and regulatory headwinds. The dividend hike and $5 billion buyback program failed to reassure investors, highlighting structural challenges in the current macroeconomic environment.

Diversified Banks Sector Mixed as Citigroup Outperforms
While U.S. Bancorp languishes, Citigroup (C) has outperformed the sector with a 7.1% gain since its Q2 earnings. Citigroup’s 8.2% revenue growth and 3.5% beat on EPS estimates highlight a stark contrast to USB’s struggles. Truist Financial (TFC) and PNC (PNC) also showed stronger relative performance, with PNC surpassing estimates by 1.3%. The diversified banks sector’s 1.1% revenue beat average underscores U.S. Bancorp’s position as the weakest link in a mixed earnings season.

Bearish Options and ETFs to Capitalize on Volatility
• RSI: 27.57 (oversold)
• MACD: 0.135 (bearish crossover)
• 200D MA: $45.95 (price below long-term trend)
• Bollinger Bands: Lower band at $44.64 (support near current price)

Technical indicators suggest a short-term bearish bias for USB, with RSI near oversold territory and price testing the lower Bollinger Band. Two options stand out for aggressive bearish plays:

• USB20250808P43.5 (Put, $43.5 strike, 2344 turnover)
- IV: 23.68% (moderate volatility)
- Leverage: 91.21% (high potential return)
- Delta: -0.42 (moderate sensitivity to price drops)
- Theta: -0.0345 (time decay manageable)
- Gamma: 0.2545 (strong sensitivity to price movement)
- Payoff at 5% downside: $0.20 per share (4.5% return on $43.5 strike)
- This contract offers a balance of leverage and liquidity, ideal for a short-term bearish bet as USB tests key support levels.

• USB20250808P44.5 (Put, $44.5 strike, 366 turnover)
- IV: 17.37% (reasonable volatility)
- Leverage: 48.64% (moderate return potential)
- Delta: -0.73 (high sensitivity to price drops)
- Theta: -0.0176 (low time decay)
- Gamma: 0.2919 (strong price responsiveness)
- Payoff at 5% downside: $0.95 per share (21% return on $44.5 strike)
- A high-delta option for those betting on a sharper pullback below $44.50, with favorable gamma for accelerating gains as USB declines.

If $43.50 breaks, USB20250808P43.5 offers a leveraged short-side entry. For a sharper decline, USB20250808P44.5 could capitalize on a breakdown below the $44.64 Bollinger Band. Aggressive bears may consider these contracts as USB’s 52-week low looms at $35.18.

Backtest U.S. Bancorp Stock Performance
The backtest of USB's performance after an intraday plunge of -2% shows favorable results. The 3-Day win rate is 52.79%, the 10-Day win rate is 54.55%, and the 30-Day win rate is 57.58%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest period was 2.75%, which occurred on day 59, suggesting that USB can recover from a significant intraday decline.

Bullish Breakout or Bearish Breakdown? Watch These Levels
The sustainability of U.S. Bancorp’s decline hinges on its ability to hold key support levels. A close below $43.50 could trigger a test of the 52-week low at $35.18, while a rebound above $44.64 may reignite short-term bearish momentum. Investors should monitor Citigroup (C), the sector leader with a -3.14% intraday drop, as a barometer for broader banking sector sentiment. Aggressive bears may consider the USB20250808P43.5 put if $43.50 breaks, but watch for a potential reversal above $44.64. With the backtest showing a 57.23% win rate over 30 days, the near-term outlook remains volatile. Watch for $43.50 breakdown or regulatory reaction.