Bank of America (BAC) shares plunged 8.12% at the market open on Thursday, as President Donald Trump's announcement of sweeping new tariffs sent shockwaves through the financial sector. The sharp decline comes amid growing fears that the escalating trade tensions could push the global economy into a recession, potentially impacting banks' profitability and loan growth.
The sell-off in Bank of America stock follows Trump's decision to impose a 10% baseline tariff on all imports to the United States, with higher duties on dozens of other countries. This move has sparked concerns about a full-blown trade war and its potential to destabilize the world trade order. As a result, investors are fleeing from riskier assets, including bank stocks, which are particularly sensitive to economic uncertainties.
JPMorgan analyst Elias Haddad commented on the market reaction, stating, "This was the first bullet thrown in this trade war and it could get nasty and that is spooking investors. We're going to continue to trade on a heavy tone because of the heightened risk of either recession or stagflation."
Adding to the pressure on Bank of America, JPMorgan Chase has cut its price target for the bank from $49.50 to $43.50, while maintaining an overweight rating. This adjustment reflects the growing caution among analysts regarding the banking sector's near-term prospects. However, JPMorgan analysts have indicated that Bank of America may be better positioned than some peers due to its lower credit risk profile.
The broader market has also reacted strongly to the tariff news, with S&P 500 futures falling 3.7% and Nasdaq futures tumbling 4.4% in pre-market trading. The CBOE Volatility Index, often referred to as Wall Street's fear gauge, touched a three-week high, further highlighting investors' concerns about the economic outlook.
