Bank of America, Big Banks Reflect a Sullen Monday Market

Mr. Market is in a bit of a funk today as the major indices, S&P 500 (SNPINDEX: ^GSPC  ) and the Dow (DJINDICES: ^DJI  ) , looked downright anemic by mid-morning compared to the rally just before the weekend. Financials are no exception, with Bank of America (NYSE: BAC  ) experiencing lots of trading volume so far today, but not in a good way, as shares have slipped more than 1%.

To be fair, other big banks like JPMorgan Chase, Citigroup, and Wells Fargo (NYSE: WFC  ) are also in the dumps so far today, experiencing peaks and valleys, but only within their respective red zones. What's going on, here?

One thing that could be dragging the big bank sector down is the winding down of the Davos Economic Forum, and the general feelings now trickling out of that mega-meeting. While the big takeaways from the summit were positive, investors might be getting a little jittery about the big-bank sector as the implications of what was said begins to sink in.

For example, the notion that the financial crisis is at an end is wonderful news, but the idea that business as usual can now continue might not be music to investors' ears. For example, the warm and fuzzies seemed to be fueling complacency about corruption , certainly not something that investors want to see more of. Then, there were the comments from Goldman Sachs CEO Lloyd Blankfein. According to him, upbeat housing news and a generally sunny economic picture should fuel more mergers and acquisitions in the industry. Is the prospect of some banks getting even bigger spooking investors? 

Blankfein's comments were echoed by other big-bank honchos, including Jamie Dimon. And this may account for the second reason the markets, and financials in particular, are down today: so is housing.

A report by the National Association of Realtors noted that pending home sales dipped 4.3% in December . For big banks facing a revenue push -- particularly with the Fed's stress tests coming their way soon -- the prospect of less mortgage activity is a real downer. For B of A, which is currently making a renewed commitment to mortgage writing, this could be especially hurtful. Wells Fargo, with its huge portion of the mortgage market, may be even more affected -- but investors appear to be relying on that bank's much-ballyhooed core strength, as its shares aren't seeing nearly the same weakness as its peers.

Of course, while some of the concerns of the day are big-picture issues that investors in Bank of America and other banks will need to keep an eye on, the price movements of a stock over the course of a single day are just north (if north at all) of completely meaningless. Foolish investors should mind the broad fundamental outlook, but not the daily market squiggles.

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.


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12/19/2014 4:04 PM
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Bank of America CAPS Rating: ****
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Wells Fargo CAPS Rating: ****

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