Discover stock recovers on merger optimism

Investing.com -- Shares of Discover Financial Services (NYSE:DFS) pared earlier losses, trading down 4% midday after a report from The New York Times (NYSE:NYT) indicated that the Justice Department may not oppose its merger with Capital One (NYSE:COF). The stock had fallen to lows earlier in the session, touching $152.3, but recovered to trade above $169 as the broader financial sector faced declines.

The market’s initial reaction to the news of President Trump’s tariffs plan had sparked concerns over weaker capital markets and a potential slowdown in consumer spending, leading to a downturn in bank stocks. However, Discover’s shares showed resilience following the report that the Justice Department had communicated to regulators, specifically the Federal Reserve and the Office of the Comptroller of the Currency, that it did not find sufficient competition concerns to block the proposed $35 billion merger with Capital One.

The merger, announced in February 2024, had been met with skepticism due to worries that it could negatively impact consumers, particularly those seeking credit cards without an established credit history. During the Biden administration, the Justice Department had expressed concerns about the deal’s potential effects. Nevertheless, the investigation continued into President Trump’s term, and this week’s letter from the Justice Department appears to have alleviated some of the regulatory uncertainty surrounding the merger.

The news of the Justice Department’s stance is a positive development for Discover as it suggests a smoother path forward for the merger, which is a significant event for the company and its stakeholders. However, it is important to note that the information regarding the department’s position is based on anonymous sources and has not been officially confirmed.

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