Why Bank of America Shares Are Down 5% Today

By Jordan Wathen Markets Fool.com

What happened

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Shares of Bank of America (NYSE: BAC) are down about 5% as of 2:30 p.m. EDT, as banks lead a broad Tuesday decline in stocks.

So what

It seems that a number of factors are at play in the plunge of bank stocks today. Recently, data from the Federal Reserve pointed to a contraction in bank credit, as year-over-year growth in commercial and industrial loans turned negative in February.

Some investors also seem worried that the markets were overoptimistic about a potential cut in corporate income taxes. The Trump administration is having a hard time rounding up support for a GOP-proposed healthcare bill, suggesting that other campaign promises -- corporate tax cuts and infrastructure spending, for example -- may meet similar roadblocks.

Image source: Getty Images.

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Now what

More so than many other banks, Bank of America's earnings are highly sensitive to changes in interest rates and lending activity. Since the yield on the 10-year U.S. Treasury Note peaked at 2.62% on March 13, Bank of America's share price has followed the 10-year yield lower.

With a recent reading of 2.43%, lowered yields and declining optimism about higher inflation and interest rates are weighing on the share prices of the most rate-sensitive bank stocks.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.