By Andrew Welsch

Bank and brokerage stocks fell sharply Wednesday morning as investors weighed the economic ramifications of President Donald Trump's far reaching tariffs.

The KBW Nasdaq Bank Index fell 7.7% Thursday morning. Shares of the nation's largest consumer banks were among those hardest hit. Bank of America's stock plunged 9.7%. Shares of Wells Fargo and JPMorgan Chase were down 7.6% and 6.3%, respectively.

Trump's new tariffs were higher than many on Wall Street expected and they have now amplified investor worries of weak economic growth, even a possible recession. An economic slowdown or recession could dampen demand for loans and increase delinquencies, hurting banks' profitability.

A weaker economy, which many investors had already been factoring in before President Donald Trump's bombshell tariff announcement, may hurt merger and acquisition activity as businesses cut back on investments in the face of uncertainty on trade policy.

Shares of Morgan Stanley, which operates large investment bank and wealth management businesses, dropped 9.7%. Rival Goldman Sachs fell 8%. Shares of investment bank Stifel Financial were down 11%.

Brokerage and wealth management firms weren't spared Thursday morning. Falling equity markets may mean diminished revenue generated from fees on assets under management. And less stock trading could hurt firms that rely on payment for order flow as part of their revenue.

Shares of Robinhood Markets and Interactive Brokers dropped 11% and 8%.

Analysts at BofA Securities wrote in a Wednesday note that if the equity market correction deepens, there is a risk to brokerage firms' earnings from diminished trading, less use of margin loans, and lower fees on assets under management. "After a strong finish to 2024, the escalating trade war and federal spending cuts have increased the risk of stagflation," the analysts wrote, referring to the possibility of high inflation and low economic growth.

An economic downturn may also lead clients to refrain from putting more money into their accounts. Shares of Charles Schwab, one of the nation's largest wealth management companies, fell 4.9%. Analysts have been closely monitoring Schwab's ability to bring in new client money this year as a sign that it can keep growing.

Shares of Raymond James Financial and Ameriprise Financial, two large wealth management companies with thousands of financial advisors, both fell 7.5%.

Write to Andrew Welsch at andrew.welsch@barrons.com

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April 03, 2025 10:22 ET (14:22 GMT)

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