Several of the biggest U.S. banks are experiencing significant losses today, as worries about President Donald Trump’s tariffs and economic growth are impacting the overall market. JPMorgan Chase (NYSE: JPM), the country’s largest bank by assets, saw its shares drop by nearly 5% by 10:52 a.m. ET. Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) also faced declines of 6.5% and 7.5%, respectively, at that time.
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Estimates for first-quarter GDP have taken a hit. The Federal Reserve Bank of Atlanta’s GDPNow model recently forecasted a sharp 2.8% decline in GDP for the first quarter, a stark contrast to the 2.3% growth predicted just a week ago and the 4% growth estimated a month ago. These rapid downward revisions are some of the most significant since the onset of the pandemic.
The ongoing trade war, escalated by the Trump administration’s tariffs, is believed to be a contributing factor to this market turbulence. Tariffs, now in place on Mexico, Canada, and China, aim to boost American competitiveness but could lead to increased consumer prices and hinder economic growth. The Brookings Institute estimated that the tariffs on Canada and Mexico, coupled with expected retaliatory tariffs, could reduce real GDP growth by $75 billion in the U.S.
Additionally, Citigroup faces scrutiny over recent reports of manual errors in bank transfers. These errors, including a mistaken $81 trillion payment and a nearly $6 billion transfer by the wealth management division, raise concerns about Citigroup’s internal controls. The bank had already been fined $400 million in 2020 for regulatory violations related to previous errors in transactions.
While prospects for bank stocks looked promising earlier in the year due to deregulation and a steepening yield curve, concerns about a potential recession and recent regulatory troubles have cast a shadow over the sector. Despite these challenges, long-term optimism remains for bank stocks, though smaller institutions may offer more immediate opportunities.
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Citigroup, Wells Fargo, and JPMorgan Chase are advertising partners of Motley Fool Money. Bram Berkowitz holds no positions in the stocks mentioned, and The Motley Fool both holds positions in and recommends JPMorgan Chase while adhering to a disclosure policy.
