Wells Fargo & Co.'s stock slipped 0.3% in premarket trade Wednesday, bucking the early gains seen in the financial sector and the broader stock market, after the banking giant was downgraded at J.P. Morgan, citing mounting public and regulatory scrutiny over fraudulent accounts following "tough" Senate hearings. Analyst Vivek Jeneja cut his rating to neutral, after being at overweight since October 2015, and trimmed his stock price target to $48 from $53.50. That follows upgrades the past two sessions, at Morgan Stanley and R.W. Baird. Wells Chief Executive John Stumpf testified Tuesday in front of the Senate Banking Committee, with Senator Elizabeth Warren calling him "gutless" for not taking full responsibility for the opening of fraudulent accounts. Juneja said he believes Wells will have to spend a lot more on litigation, revenue growth will probably slow, the reputational hit on the bank will be "material" and it could push the bank to move to grow earnings more in areas which carry a lower valuation multiple. "We expect management to turn this around but it will likely take some time and expense--hence the downgrade," Juneja wrote. The stock has tumbled 8.4% so far this month, while the SPDR Financial Select Sector ETF has lost 3.1% and the S&P 500 has slipped 1.4%.
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