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C, MS, and BAC: Top Banks Tumbled More than 4%

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Financial sector stocks

Top banking stocks, including Citigroup (C) and Bank of America (BAC), were hit hard on May 13 amid heightened fears of a full-blown trade war between the United States and China. China’s latest announcement of its plans to raise tariffs on $60 billion worth of US goods on June 1 has extended the ongoing trade war and heightened volatility across global markets.

Citigroup, Morgan Stanley (MS), and Bank of America fell 5.2%, 4.7%, and 4.5%, respectively, on May 13.

Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) also fell significantly yesterday. The Financial Select Sector SPDR ETF (XLF) fell 2.9%.

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Stable economic growth and consumer spending bode well for the banking sector in general. A trade war may affect consumer sentiments as well as spending levels. At the same time, business activity may be affected, which may, in turn, affect banks’ commercial lending activities and market-related activities such as underwriting, mergers and acquisitions, and advisory practices.

Asian revenue

Asia contributed ~22% of Citigroup’s first-quarter revenue. The region stands to be greatly affected in the event that the trade war extends further. Citigroup and Bank of America are up ~0.7% in premarket trading today.

Morgan Stanley stock was likely hammered more than its peers for its role in the Uber (UBER) IPO. Uber stock fell 18% from its IPO price in two days. Many investors feel that Morgan Stanley could have done a better job underwriting the IPO.

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