NEW YORK, April 21 (UPI) -- Bank stocks led declines on Wall Street Monday in a paradox of massive proportions -- a reported profit at Bank of America fooling, apparently, no one.
After profits reported by Citigroup Inc, Goldman Sachs and JPMorgan & Chase helped raise confidence in the sector in the past week, Bank of America seemed to provide another boost.
But after Bank of America reported a profit of $4.2 billion for the quarter, the Dow Jones industrial average turned lower, losing 289 points on the day. Bank of America shares slide 24 percent. Citigroup shares fell 19 percent. JPMorgan shares dropped 11 percent.
It sounds downright unfair. But investors found Bank of America's fundamentals weak. Chairman and Chief Executive Officer Kenneth Lewis called the gains "extremely welcome news," but also said the bank faces "extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment."
Frequently noted, Bank of America set aside $13.4 billion to cover credit losses, an increase from $8.5 billion in the fourth quarter -- a vivid sign that the bank's basic product line has at least near-term obstacles, namely its customers were running out of money.
Unlike Goldman Sachs, there was no mention of Bank of America returning its $45 billion in federal bailout funding soon. For that, investors would pay close attention to U.S. Treasury Secretary Timothy Geithner's testimony before a Congressional Oversight Panel, in Washington Tuesday, looking for signs of what options the Treasury will allow for repaying the government.
Trying to dodge the stigma and the restrictions that come with bailout funds, banks, a week ago, looked ready to hand government funding back. The Treasury, however, appears determined to take a more cautious approach, at least waiting until results of its financial firm stress tests come in at the end of the month. Bank of America has aptly demonstrated that profits are not convincing unto themselves.
On Tuesday, Asian markets followed the U.S. lead, dropping sharply in Tokyo and Hong Kong. The Nikkei 225 in Japan lost 213.42 points to 8,711.33. The Hang Seng dropped 465.02 points, 2.95 percent, to 15,285.89. In Australia, the S&P/ASX fell 2.43 percent to 3,677.40.
European markets showed slight gains. In midday trading, the FTSE 100 in London was up 0.08 percent. The DAX 30 in Frankfurt gained 0.57 percent, while the CAC 40 in Paris gained 0.35 percent. The broader DJStoxx 600 was up 0.08 percent.