USB Plummets 2.5% Amid Fed Turmoil: What's Brewing in the Banking Sector?

Summary
• U.S. Bancorp (USB) trades at $53.805, down 2.54% intraday amid sector-wide jitters.
• Federal Reserve Chair Jerome Powell faces DOJ scrutiny over building renovations, escalating political tensions.
• JPMorgan Chase (JPM) lags behind with a 2.1% decline, signaling broader banking sector fragility.

Today’s selloff in USB and its peers reflects a perfect storm of regulatory uncertainty and Trump-era policy shifts. With the Fed’s independence under attack and Trump’s aggressive moves on credit card rates and mortgage bonds, the banking sector is caught in a crossfire of political and economic forces. The stock’s sharp decline from its 52-week high of $56.195 underscores the fragility of investor sentiment.

Fed Scrutiny and Trump's Policies Spark Banking Sector Volatility
The collapse in USB’s share price stems directly from the Justice Department’s criminal investigation into Fed Chair Jerome Powell and Trump’s escalating regulatory interventions. The DOJ probe into Powell’s alleged misstatements about the Fed’s building renovations has shattered market confidence in central bank independence. Simultaneously, Trump’s directive for Fannie and Freddie to purchase $200 billion in mortgage bonds—a move echoing the 2008 crisis—has triggered fears of systemic instability. These developments have amplified risk-off sentiment in the banking sector, with USB’s 2.5% drop mirroring JPMorgan’s 2.1% decline as investors flee perceived regulatory and economic overreach.

Banking Sector Under Pressure as JPMorgan Trails USB's Slide
The Commercial Banks sector is in freefall, with U.S. Bancorp’s 2.5% decline outpacing JPMorgan Chase’s 2.1% drop. Both stocks are reacting to the same catalysts: Powell’s legal troubles and Trump’s mortgage bond mandate. However, USB’s sharper decline suggests heightened sensitivity to regulatory risks, given its regional bank profile compared to JPMorgan’s diversified global operations. The sector’s broader vulnerability is evident in the lack of a clear leader, with no major bank stock escaping the sell-off.

Options and ETFs in a Volatile Banking Sector: Strategic Plays
• 200-day average: $46.42 (below current price)
• RSI: 58.0 (neutral)
• MACD: 1.23 (bullish), Signal Line: 1.35 (bearish), Histogram: -0.12 (divergence)
• Bollinger Bands: Upper $56.02, Middle $54.43, Lower $52.83 (price near lower band)
• Support/Resistance: 30D support $53.37–$53.51, 200D support $47.42–$47.81

USB’s technicals paint a mixed picture. While the 200-day average remains well below current levels and RSI hovers in neutral territory, the MACD histogram’s negative divergence signals short-term bearish momentum. Key support levels at $53.37 and $52.83 are critical to watch, with a breakdown below $52.83 likely to trigger deeper selling. The options chain reveals aggressive bearish positioning, with high-liquidity puts dominating the January 16 expiration.

Top Option 1: USB20260116P53
• Contract Code: USB20260116P53
• Type: Put
• Strike Price: $53
• Expiration Date: 2026-01-16
• IV: 28.38% (moderate)
• Leverage Ratio: 141.55% (high)
• Delta: -0.321 (moderate bearishness)
• Theta: -0.0419 (moderate time decay)
• Gamma: 0.200 (high sensitivity to price swings)
• Turnover: 19,340 (high liquidity)

This put option offers explosive potential if USB breaks below $52.83. The 141.55% leverage ratio amplifies gains in a 5% downside scenario, where payoff would be max(0, $53 - $51.11) = $1.89 per share. High gamma ensures the delta becomes more negative as the stock drops, locking in profits.

Top Option 2: USB20260116P52.5
• Contract Code: USB20260116P52.5
• Type: Put
• Strike Price: $52.5
• Expiration Date: 2026-01-16
• IV: 30.03% (moderate)
• Leverage Ratio: 199.22% (very high)
• Delta: -0.239 (moderate bearishness)
• Theta: -0.0423 (moderate time decay)
• Gamma: 0.164 (high sensitivity)
• Turnover: 3,848 (high liquidity)

This contract provides even higher leverage (199.22%) for a 5% downside, yielding max(0, $52.5 - $51.11) = $1.39 per share. The 30.03% IV suggests market anticipation of further volatility, making it ideal for aggressive short-term bearish bets.

Hook: If USB breaks below $52.83, USB20260116P53 and USB20260116P52.5 offer asymmetric risk/reward for bearish traders.

Backtest U.S. Bancorp Stock Performance
The backtest of USB's performance after a -3% intraday plunge from 2022 to the present shows favorable results. The 3-Day win rate is 49.60%, the 10-Day win rate is 50.40%, and the 30-Day win rate is 50.40%, indicating that USB tends to recover relatively quickly. The maximum return during the backtest period was 1.19%, which occurred on day 59, suggesting that while the recovery is positive, the overall return is modest.

Act Now: USB's Support Levels and Sector Dynamics Demand Immediate Attention
USB’s 2.5% drop is a warning shot for the banking sector, driven by Powell’s legal woes and Trump’s regulatory overreach. The stock’s proximity to key support at $53.37 and $52.83 will determine its near-term fate. JPMorgan’s 2.1% decline highlights the sector-wide nature of the selloff, with no clear safe haven. Investors should prioritize short-term puts like USB20260116P53 and monitor the DOJ’s next moves on Powell. A breakdown below $52.83 could trigger a cascade of selling, making immediate action critical.