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Here's Why Shares Of Bank Of America Were Down On Friday – The Motley Fool



What happened

Shares of Bank of America (NYSE: BAC) traded down 4% on Friday afternoon on investor fears that falling bond yields and the potential for a slowing economy will eat into results. Bank of America missed out on a Federal Reserve – rallied on Thursday, falling 1%, and continued its downward spiral on Friday as investors' digested what the Fed's moves might mean for banks.

So what

Bank stocks, including Bank of America, under pressure on Friday after the Federal Reserve, indicated intends to take a more cautious approach on interest rates due to fears of economic weakness. The comments led to a rally in bond prices and resulted in the yield on a two-year Treasury bond rising above the yield on a 1

0-year, so-called inverted yield curve.

 Red arrow pointing down.

Image: Getty Images

If history is a guide, an inverted yield curve is an indicator that is on the horizon. Inverted yield curves also make landing less lucrative to banks. [BankofAmericaasoneofthelargestUSbanksintermsofdepositsismorerelatedtocommercialbankingthansomeofitspeersandisgenerallyviewedasmoresusceptibletoweaknessintheUSeconomyThereforeitssharesaresensitivetochangesintheeconomicoutlook

Now what

last few days. It's possible the declines are an overreaction, but given the growing amount of economic uncertainty, it's far from certain the shares will correct course any time soon.

Shares of Bank of America have almost doubled over the past three years, even after the recent declines. With yields falling and the Fed rate-hike cycle on hold, the stock could be stuck in neutral for the time being.


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