Dow: Why Banks Didn't Play Ball

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It was a solid day for stocks today, as the Dow (DJINDICES: ^DJI  ) and the broader S&P 500 Index (SNPINDEX: ^GSPC  ) both advanced 0.6%. The S&P 500 achieved a new five-year high, but financials didn't play along -- they were the only losing sector today. In fact, JPMorgan and Bank of America (NYSE: BAC  ) were two of the three worst-performing stocks in the S&P 500, declining 0.8% and 4.2%, respectively. (Unsurprisingly, then, they were the worst performing Dow components.)

Why banks didn't play ball
Both B of A and Citigroup (NYSE: C  ) reported earnings today. The results were not well received; as mentioned above, B of A shares fell 4.2%; meanwhile, Citi shares lost 2.9%. As one New York money manager told Bloomberg:

Both organizations are, for lack of a better word, somewhat lost. [They] have been spending a significant amount of time dealing with the problems of the past rather than aggressively marketing the organizations.

I suspect this view is relatively popular among professional investors, who find it convenient to conflate the two companies' positions, performance, and prospects. (How's that for alliteration?) A reductive model of the universal banks has J.P. Morgan in a league of its own, completely separate from the second tier made up of B of A and Citi, which are still floundering.

Of course, the notion that this view is widely held is merely a hypothesis, and one that is difficult, at that. But if it is true, I think that part of the decline in B of A's stock is attributable to that of Citi's. You might retort: Why, then, would the former fall harder than the latter? Good question, but I think the recent relative performance of the two shares may help to answer it:


Data by YCharts.

As the graph clearly shows, B of A shares have dusted Citi's over the three-month period ended yesterday, while both have smashed the broad market. In other words, on the heels of a strong run-up in their stock prices, B of A had further to fall than Citi.

You may have guessed that I don't share the view that B of A and Citi are similar organizations. Keep in mind, variant perception is a potential source of opportunity -- assuming it is correct.

To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy, and three reasons to sell. Just click here to get access.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2202919, ~/Articles/ArticleHandler.aspx, 9/24/2016 4:56:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 19 hours ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
BAC $15.52 Down -0.08 -0.51%
Bank of America CAPS Rating: ****
C $47.15 Up +0.04 +0.08%
Citigroup CAPS Rating: ***