Bank Stocks JPMorgan Chase, Wells Fargo, and Citigroup: Why They're Getting Slammed Today

As the market takes a dive today, shares of some of the largest U.S. banks are getting hammered. JPMorgan Chase, Wells Fargo, and Citigroup are among the hardest hit, with each stock down more than 5% as of 10:52 a.m. ET. So, what's causing this sell-off in bank stocks, and what does it mean for investors?



First, let's take a look at the broader market context. The Dow Jones Industrial Average has fallen more than 1,000 points today, its worst drop of 2021 so far. This sell-off comes on the heels of a week of volatile trading, driven by concerns over President Donald Trump's tariffs and economic growth. The Federal Reserve Bank of Atlanta's GDPNow model projected first-quarter GDP to decline 2.8% in 2024, a significant downward revision from the previous estimate of 2.3% growth. This revision, along with weakening consumer sentiment and a ratcheted-up trade war, has resulted in a marketwide sell-off that has only accelerated.

Now, let's dive into the specific factors affecting bank stocks today:

1. Economic concerns over President Trump's tariffs and economic growth: The implementation of tariffs on Mexico, Canada, and China, along with retaliatory tariffs, is expected to lower real GDP growth by $75 billion in the U.S. (Brookings Institute, 2024). This trade war and the uncertainty it creates negatively impact economic growth, consumer sentiment, and bank stocks.
2. Weakening consumer sentiment and GDP estimates: The Federal Reserve Bank of Atlanta's GDPNow model projected first-quarter GDP to decline 2.8% in 2024, a significant downward revision from the previous estimate of 2.3% growth. Weakening consumer sentiment and a ratcheted-up trade war have resulted in a marketwide sell-off that has only accelerated.
3. Regulatory issues and manual errors at Citigroup: Citigroup has faced regulatory issues and fines due to manual errors in bank transfers. In 2020, regulators slapped Citigroup with a consent order and a $400 million fine for the bank's failure to correct long-standing internal and risk controls. In 2021, Citigroup accidentally sent an $81 trillion payment to a client instead of $280 million. These incidents have negatively impacted Citigroup's stock performance.



As investors grapple with these economic concerns and regulatory issues, bank stocks are taking a hit. However, it's essential to remember that banks are cyclical and tend to be impacted by the economy and consumer sentiment. As the economy recovers and uncertainty decreases, bank stocks may rebound.

Moreover, banks with strong capital positions and liquidity, like JPMorgan Chase, are better equipped to weather economic downturns and regulatory challenges. While today's sell-off is disconcerting, it's crucial to maintain a long-term perspective and consider the underlying fundamentals of these banks.

In conclusion, the decline in bank stocks today is driven by a combination of economic concerns, regulatory issues, and market volatility. As investors navigate this challenging environment, it's essential to stay informed and make strategic decisions based on the long-term prospects of these banks. By focusing on the fundamentals and maintaining a disciplined investment approach, investors can position themselves to capitalize on the eventual recovery in bank stocks.