Bank of America Shareholders Running For The Exits

Bank of America Corp. (BAC) is trading lower by nearly 4% in Wednesday’s U.S. session after beating Q3 2020 estimates by a penny and missing the mark on revenue. The banking giant earned $0.51 per-share, marking a 32% decline compared to the same quarter in 2019. Revenue fell 11.6% year-over-year to $20.3 billion while the company increased provisions for credit losses by $1.4 billion to address a 5% increase on loans that now stand at $319 billion.

U.S. Banks Selling Off

Major U.S. commercial banks are getting sold this week, despite seemingly upbeat third quarter earnings reports. Citigroup Inc. (C) has posted the largest losses so far, dropping more than 5% despite beating profit estimates by $0.53 on Tuesday.  Even sector leader JPMorgan Chase and Co. (JPM) is losing ground, down by more than 1%. The broad-based sell-the-news reaction suggests these stocks were over-valued, even though they’ve been exceptionally weak 2020 performers.

Cautious executive commentary following the releases has added to deteriorating sentiment. Chase warned that it will take another round of government stimulus to make them more comfortable about current reserves set aside for a downturn that could trigger a wave of defaults. Citigroup expressed caution as well, stating it now expects a “somewhat more muted and slower recovery in both unemployment and GDP through 2022.”

Wall Street And Technical Outlook

Wall Street currently views Bank of America as a ‘Strong Buy’ based upon 5 ‘Buy’ and 1 ‘Hold’ recommendation. No analysts are recommending that shareholders sell positions and move to the sidelines at this time. Price targets currently range from a low of $23 to a Street-high $37 while the stock is now trading at the low target. This humble placement after earnings suggests that price targets will need to come down from current levels.

Bank of America lifted to an 11-year high in December 2019 and rolled over in February 2020, breaking multiple support levels before bottoming out at a 3-year low in the upper teens. It’s now failed 4 attempts to remount the 200-day EMA, which was broken on heavy volume in the first quarter. Relative strength readings are deteriorating, predicting the stock will eventually test and potentially break the first quarter low.

For a look at all of today’s economic events, check out our economic calendar.