Bank of America Corporation (NYSE: BAC) shares have weakened more than 3% last week but continue to trade above the psychological support level that stands at $40. The U.S. released the Nonfarm Payrolls report on Friday, the country added only 235K jobs in August, and FED’s ultra-loose monetary policy will continue to pressure the margins of the Bank of America
Fundamental analysis: Bank of America’s delinquency rate fell to 0.92% in July from 0.97% in June
Bank of America has proven its stability during the first half of the 2021 fiscal year, and CEO Brian Moynihan said that consumer spending had surpassed pre-pandemic levels, deposit growth remains strong, and loan levels have begun to grow. Credit card metrics strengthen in July and Betsy Graseck, an analyst from Morgan Stanley, said that credit card metrics continue to perform better than expected.
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Bank of America’s delinquency rate, which is defined as the percentage of total loans that are 30 days past due, fell to 0.92% in July from 0.97% in June. The board of directors has agreed to increase the dividend by 17% to $0.21/quarterly share dividend, which will be payable on September 24.
On the other side, the latest U.S. economic data was not encouraging; pending home sales unexpectedly fell, the preliminary consumer sentiment index fell to its lowest level in a decade, and there are rising concerns over the Delta variant spread.
The U.S. job report disappointed as the Nonfarm Payrolls report showed that the country added only 235K jobs in August, much below the economists’ estimate of 750K. This will probably influence the U.S. Federal Reserve’s stance of maintaining an ultra-loose monetary policy for the upcoming period; still, the positive news is that the unemployment rate fell to 5.2%, while the average hourly earnings increased by 0.6% month-over-month and 4.3% year-over-year.
The slowdown in U.S. jobs growth raised questions about the pace of the economic recovery, and FED’s ultra-loose monetary policy will continue to pressure the margins of the Bank of America. Bank of America has a strong balance sheet, its dividend remains safe, but this stock has seen massive gains since January 2021.
In the current risky environment and the fact that the financial sector, especially banks, continues to be impacted by FED’s ultra-loose monetary policy, probably it is not the best moment to invest in Bank of America shares.
Technical analysis: Bank of America shares remain in a bull market for now
Bank of America shares have advanced more than 30% since the beginning of January 2021, and the current share price stands around $41. Bank of America shares remain in a bull market; still, if the price falls below the $35 support level, it would be a firm “sell†signal and probably a trend reversal sign.
Summary
Bank of America has proven its stability during the first half of the 2021 fiscal year, and the board of directors approved a 17% increase in the quarterly dividend. Bank of America shares continue to trade in a bull market, but if the price falls below $40, the next target could be around $38 or even $35.
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