Bank of America Corporation (NYSE: BAC) shares have weakened this Thursday by more than 4% and closed the day below the $40 level. For now, there is no risk of the bear market, but if the price falls below $38 support, the next target could be around $36.
Fundamental analysis: Bank of America continues to respond to the needs of its clients in the best possible way
Bank of America shares have weakened below $40 support after the FED announcement to maintain its ultra-loose monetary policy unchanged. The U.S. Federal Reserve had a monetary policy meeting this Wednesday and left the interest rate unchanged as widely anticipated, while some policymakers said that inflation accelerated faster and could be more persistent than expected.
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Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, and FED raised expectations for real GDP growth in 2021 to 7.0%. Even though the U.S. economy continues to recover from the pandemic, the U.S. Federal Reserve announced once again that it would focus on ensuring that the labor market makes a full recovery.
FED’s ultra-loose monetary policy will continue to pressure the margins of the Bank of America; however, seven Fed officials expect hikes in 2022.
“Fed doesn’t need to provide the same level of policy accommodation, and the great debate is when is inflation transitory or not transitory. Banks are awash in deposits and reserves while the Fed holds rates down and keeps buying Treasurys and mortgage-backed securities each month,” said Bank of America CEO Brian Moynihan.
Bank of America has proven its stability during the Covid-19 pandemic, and it will probably have revenue growth and margin expansion in the upcoming quarters. Bank of America’s first-quarter results were in line with the recovery in economic activity; total revenue has increased by 0.2% Y/Y to $22.82 billion, while the GAAP EPS was $0.86 (beats by $0.20).
The current dividend yield stands around 1.73%, and it is important to mention that the board of directors declared a $0.18/quarterly share dividend in April (in line with the previous). Bank of America continues to respond to the needs of its clients in the best possible way and return capital to its shareholders.
According to U.S. Community Bank Market Reports, the outlook for bank returns is significantly more favorable currently than even a few months ago. The main reason for this is that the credit quality will continue to improve due to the accelerated pace of vaccinations and additional government stimulus.
Bank of America is currently trading at a forward P/E ratio of 13.80, the book value per share is around $30, and with the market capitalization of $354 billion, shares of this bank are reasonably valued.
Technical analysis: Bank of America shares remain under pressure
Bank of America shares have weakened this Thursday by more than 4%, and according to the rules of technical analysis, the price could test the support level at $38 in the upcoming days.
If the price falls below $38 support, it would be a firm “sell” signal, and the next target could be around $36. On the other side, if the price jumps above $42 resistance, it would be a signal to trade Bank of America shares, and the next target could be around $44.
Bank of America shares have weakened this Thursday by more than 4%, and according to technical analysis, the risk of further decline is not over. If the price falls below $38 support, it would be a firm “sell” signal, and the next target could be around $36.
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