What's Going On With Bank Of America (BAC) And Wells Fargo (WFC) Shares

BY Benzinga | ECONOMIC | 11/14/23 03:45 PM EST

Bank of America Corp (BAC) and Wells Fargo & Co (WFC) shares are trading higher going into the close of Tuesday's session. Shares of banks and financial services stocks at large are trading higher amid overall market strength after October CPI data showed softer-than-expected inflation.

What Happened With CPI Data?

In October 2023, US inflation dropped to 3.2% from 3.7% the previous month, surprising economists who anticipated a slightly higher rate of 3.3%. This decline signaled a sustained downward trend after a summer rise. Before the CPI report, the market had an 86% certainty of no interest rate changes in December.

However, traders were contemplating the possibility of as many as three rate cuts in the upcoming year, potentially kicking off around June...

See Also: Could This Investor's Move Signal Bull Market For U.S. Stocks?

Why This Matters To Bank Investors

Banks benefit when interest rates are stable or expected to decrease. Lower inflation and the potential for rate cuts suggest that the Federal Reserve might not be compelled to raise interest rates aggressively.

Banks like Bank of America (BAC) and Wells Fargo (WFC) profit from a stable or lower rate environment because it can reduce their borrowing costs, which in turn can boost their profitability.

Banks also make money by borrowing at lower short-term rates and lending at higher long-term rates. If there's an anticipation of stable or lower rates, it encourages borrowing, which can lead to increased lending activity.

This scenario can positively impact the banks' revenue streams.

According to data from Benzinga Pro:

  • BAC has a 52-week high of $38.30 and a 52-week low of $24.96
  • WFC has a 52-week high of $48.84 and a 52-week low of $35.25

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.