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Here's Why Wells Fargo, JPMorgan Chase, Citigroup, and Bank of America Shares Are Down Friday

By Matthew Frankel, CFP® - Updated Mar 27, 2020 at 12:17PM

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The big four banks aren't exactly ending the week on a positive note.

What happened

After its first multiday rally since early February, the stock market is in the red on Friday. As of 11:30 a.m. EDT, the Dow Jones Industrial Average and the S&P 500 benchmark indexes were both down by about 3%.

As has been rather typical during the recent market turbulence, bank stocks are doing even worse. Checking in on the "big four" U.S. banking institutions, Wells Fargo (WFC -0.04%) and Citigroup (C -0.38%) are both down by 4% today, while JPMorgan Chase (JPM -0.86%) and Bank of America (BAC -0.39%) are both off by well over 5%.

Couple at a desk signing paperwork.

During recessions, demand for loans can decline sharply. Image source: Getty Images.

So what

After the relatively strong market sentiment of the past few days, it appears that coronavirus recession concerns are back on investors' minds. Recessions lead to a decrease in demand for loans, and typically produce an uptick in delinquencies and charge-offs on existing loans as consumers struggle to pay their bills.

It's also important to note that interest rates are falling today, with the benchmark 10-year Treasury yield down by more than 6 basis points to less than 0.75%. Since banks make money by charging interest on loans, lower rates are generally a negative catalyst.

Now what

We're certainly in a recession, but the key questions on bank investors' minds are how long it will last, how deep it will be, and will the stimulus package enable consumers to keep paying their bills. Until we start to get some clarity on those things, volatility isn't likely to go away anytime soon.

Matthew Frankel, CFP owns shares of Bank of America and has the following options: short July 2020 $20 puts on Wells Fargo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
$53.55 (-0.38%) $0.20
Bank of America Corporation Stock Quote
Bank of America Corporation
$36.27 (-0.39%) $0.14
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$121.54 (-0.86%) $-1.05
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$46.12 (-0.04%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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