Bank stocks led a broader market selloff Tuesday as political uncertainty in Italy and falling U.S. interest rates spooked investors.
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The financial sector was down 3.4% on the day, making it the worst-performing sector in the S&P 500. Banks also accounted for one-third of the Dow's 392-point drop.
JPMorgan Chase, the nation’s largest bank, slipped more than 4%. Bank of America, Citigroup and Wells Fargo also traded lower. Shares of Morgan Stanley lost more than 5% of their value. The co-head of Morgan Stanley’s wealth management unit told attendees at a New York conference that the investment bank has seen “obvious” headwinds in transaction revenue, according to The Fly.
The decline in bank stocks came as global markets tumbled on concern over Italy’s political future. Coalition talks in Italy broke down, raising the likelihood of a repeat election and fueling speculation that the country could seek to exit the eurozone. In response, Italian bond yields climbed, raising the government’s borrowing costs.
Meanwhile, the yield on the benchmark 10-year U.S. Treasury note dropped below 2.8%. Lower interest rates can weigh on banks’ profits.