Shares of the bank stocks JPMorgan Chase (JPM -1.73%) and Wells Fargo (WFC -2.20%) fell 1.7% and 2.2%, respectively, for no obvious reason but likely due to new economic data and ongoing tariff news that seems to change daily.

Jobs report misses estimates

New jobs data from February once again missed economist estimates and pointed to further weakness in the economy. Nonfarm payrolls in the U.S. added 151,000 jobs last month, 9,000 less than expected. The unemployment rate ticked up to 4.1% when economists had expected 4%, and average hourly earnings rose 0.3% from the prior month, in line with expectations. Furthermore, the number of jobs added in January were revised down by 18,000 to 125,000.

Banks are cyclical, so investors tend to get concerned when they see weakness in the economy because it can result in higher loan losses, and also lead to a decrease in lending activity if businesses don't grow and consumer spending declines.

Meanwhile, President Donald Trump continues to go back and forth on tariffs, a cycle that has seemingly exhausted investors. Trump on Tuesday implemented sweeping 25% tariffs on Canada and Mexico. On Wednesday, he exempted goods covered under the North American Free Trade Agreement (NAFTA) until April 2. Today, Trump floated the idea of tariffs on Canadian lumber and dairy goods. Trump also threatened tariffs and new sanctions on Russia as he seeks further progress in peace talks between Russia and Ukraine.

Large banks are exposed to the broader economy

Large banks like JPMorgan Chase and Wells Fargo have relationships with consumers and businesses in nearly every sector of the economy, so if investors get worried about the economy or the impact of tariffs on economic growth, the sector is likely to take a hit.

Longer term, however, I certainly don't hate the set up for banks. The sector faces a much friendlier regulatory environment under Trump, and hopefully, the yield curve continues to steepen, which is when bank profits tend to perform best. While I don't think you should sell JPMorgan and Wells Fargo, I see better opportunities in the small- and mid-cap space where valuations are more attractive and where mergers and acquisitions activity could pick up as the year progresses.