Bank of America Corp. (BAC) and Citigroup Inc. (C) led U.S. bank stocks lower as a weak U.S. economy, Europe’s debt crisis and losses linked to souring home loans threaten to undermine financial industry earnings.
Bank of America, the largest U.S. lender by assets, fell 4.8 percent to $8.41 at 1:12 p.m. in New York, the lowest level since April 2009. New York-based Citigroup dropped 4.4 percent to $33.27. The KBW Bank Index (BKX) of 24 U.S. financial stocks slid 0.4 percent, declining for 10 of the past 11 days, amid concern Europe’s sovereign debt crisis may spread.
“There’s concern of a U.S. downgrade and how that leads to a ripple effect in credit markets, which leads to higher borrowing costs and an economy that’s not expanding," said Peter Kenny, a managing director in institutional sales at Knight Capital Group Inc. ‘‘There’s also a sense that the European crisis is becoming more central to the global economy than ever before."
Matthew Burnell, an analyst at Wells Fargo & Co., cut his recommendation on Charlotte, North Carolina-based Bank of America to ‘‘market perform’’ from ‘‘outperform’’ today because of lower expectations for the U.S. economy. Bank of America said yesterday that investor demands it repurchase soured mortgages may cost more than previously forecast.
Citigroup was subpoenaed by the California Attorney General’s Office as part of an investigation into mortgage securitization practices, a person familiar with the matter said after the close of trading yesterday.
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