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Tuesday's Bank Stocks: Sector drops as inflation data shows mild increase

Financial sector stocks tumbled March 13 as new inflation data showed a mild increase in prices.

The report from the Labor Department eased fears from some investors that inflation may be strengthening quickly, which could potentially lead to more interest rate hikes from the Federal Reserve. The figures showed inflation rose 2.2% in February on a year-over-year basis, coming in around analysts' expectations and increasing slightly from the 2.1% figure in January.

Bond yields have generally risen this year amid expectations of higher inflation, helping drive up share prices for banks, who often benefit from an environment of rising interest rates. But the new inflation figures helped reverse that trend slightly, said Yousef Abbasi, global market strategist at JonesTrading. This time, prices for bonds went up and bond yields fell accordingly, putting pressure on bank stocks.

Yields for 10-year Treasurys, for example, fell to around 2.85%, down from the previous close of 2.87%, according to Yahoo Finance.

"It was relatively benign," Abbasi said of the new report. "You saw bonds rally, and financials got hit on the other side of that."

The Big Four banks all fell, with JPMorgan Chase & Co. slipping 1.20% to $116.25, Citigroup Inc. dropping 1.46% to $74.91, Bank of America Corp. shedding 1.46% to $32.36 and Wells Fargo & Co. closing down 0.79% to $57.56.

Meanwhile, the Dow Jones Industrial Average decreased 0.68% to 25,007.03, the S&P 500 lost 0.64% to 2,765.31 and the Nasdaq Composite Index gave back 1.02% to finish at 7,511.01.

The declines came after President Donald Trump said he is replacing his secretary of state, Rex Tillerson, with CIA Director Mike Pompeo. Pompeo, who represented Kansas in the House and was part of the Tea Party, is expected to bring more hawkish views than Tillerson, the former CEO of Exxon Mobil Corp.

But Abbasi said the day's moves were more likely driven by market fundamentals, such as the inflation figures or a decline in tech stocks.

Major movers today included Banc of California Inc., which added 2.65% to $21.30; Luther Burbank Corp., which fell 4.90% to $12.41; and KeyCorp, which retreated 2.02% to $21.36.

S&P Dow Jones Indices and S&P Global Market Intelligence are owned by S&P Global Inc.

Market prices and index values are current as of the time of publication and are subject to change.