Discover Financial, Capital One outperform on deal approval bets

Shares in Discover Financial Services DFS.N up more than 7%, while Capital One Financial COF.N gaining ~3%, with both outperforming the broader market; analysts point to investor bets their merger would be approved by regulators

DFS on track for biggest one-day pct gain since Nov. 6

Seeking Alpha reported earlier in the day that the Department of Justice considering approving their deal

Representatives from the DoJ, Discover and Capital One did not immediately respond to a request for comment

The proposed $35-bln combination between COF and DFS, announced February 2024 but yet to receive regulatory sign-off, is seen as a litmus test for the Trump administration's willingness to approve deals

"The market reaction indicates that investors certainly in Discover want the deal to go through. It shows you that Capital One shareholders are also reasonably favorable," said Morningstar equity analyst Michael Miller.

DFS shares were the biggest gainer on the day in the S&P 500 financial services index .SPNY, itself up 1.2%

DFS down ~8% YTD after rising 54% in 2024

COF shares, looking to erase much of their losses from the last two sessions, were the third biggest gainer in the index on Monday and up <1% YTD after rising 36% in 2024