Bank of America Slides on $1.21 Billion Fine as Chip Stocks Tumble
Bank of America shares fell 4.8% on Wednesday, erasing $30 billion in market capitalization at one point, after the bank disclosed a $1.21 billion fine for failures in money laundering and sanctions controls. The penalty marks the largest regulatory fine imposed on the bank in the past decade. The announcement came late Tuesday after the market closed, prompting a sharp sell-off that briefly pushed the stock down as much as 7% before it recovered slightly from its lows.
Bank of America shares fell 4.8% on Wednesday, erasing $30 billion in market capitalization at one point, after the bank disclosed a $1.21 billion fine for failures in money laundering and sanctions controls. The penalty marks the largest regulatory fine imposed on the bank in the past decade. The announcement came late Tuesday after the market closed, prompting a sharp sell-off that briefly pushed the stock down as much as 7% before it recovered slightly from its lows.
Herman Chan, who appeared on Bloomberg Television, attributed the majority of the decline to the regulatory fine rather than the bank's quarterly earnings. The earnings report itself showed results crimped by the charge, with traders noting that estimates were missed. Additionally, the bank’s bond portfolio held over $100 billion in paper losses.
The sell-off occurred against a broader backdrop of risk-off trading as investors reacted to a hot inflation print and concerns over higher energy prices. The S&P 500 closed down more than 80 points, a decline of approximately 1%, marking a third straight day of softness. The Dow Jones Industrial Average was down about 48 points, or roughly a tenth of a percent. While the S&P 500 showed an even split with 242 gainers and 260 decliners, the tech sector led the losses.
The Nasdaq Composite and Nasdaq 100 each dropped about 2%, with the Nasdaq 100 recording its worst day since June. The Russell 2000 index, which tracks small-cap stocks, also fell about 2%, extending its correction to more than 11% below its mid-August record high. The Philadelphia Semiconductor Index declined by about 4% to 4.3%, erasing over $1 trillion in market capitalization over the last six days. UBS's chief investment office cited increased competition in AI, rising financing requirements, and higher rates as factors pressuring global chip stocks.
Defensive sectors including healthcare and consumer staples outperformed the broader market. Dollar Tree, Dollar General, Kroger, and Walmart were among the names gaining ground. In healthcare, Moderna rose about 4.6% and M.E.K. gained approximately 3.8%. M.E.K.'s CEO told CNBC that he expects the company's breakthrough cancer vaccine developed with Moderna to become faster to manufacture over time, noting that the production process has become a tight science.
Bending Spoons (BSP) soared 41% after Berkshire Hathaway agreed to invest an additional amount in the Italian technology conglomerate. This investment brings Berkshire's total stake in Bending Spoons to 4%, following a previous investment at the company's July IPO. The additional capital is intended to support Bending Spoons' acquisition pursuits.
CoreWeave shares plunged 15%, falling as much as 17% during the session as AI-related stocks declined broadly. The company's bonds dropped to levels typically indicating distress. CoreWeave's CEO stated that the decline in stock and bond prices was due to the market acting irrationally. The stock is down about 8% for the year and has fallen 64% from its all-time highs.
Bond yields initially spiked following an 8:30 a.m. CPI report, with the two-year yield jumping 16 basis points and the ten-year yield rising 11 basis points. By the close, these moves had largely retraced, with the two-year yield ending only about two basis points higher while the rest of the curve finished lower. Analysts noted that some of this movement appeared to be a haven bid driven by equity market concerns.