Bank of America Cuts Outlook as Yields Hit Multi-Year High

Bank of America shares fell more than 5% on Monday after CEO Brian Moynihan warned that investment banking fees would decline by more than 10% in the third quarter. This forecast marks a sharp reversal from the 50% growth reported in the second quarter. Moynihan cited Dealogic data indicating a 10% cross-sector slide in the investment banking market. He stated that the bank is less positioned than competitors with higher activity levels, leading to a performance dip slightly below the market average.

The broader market faced pressure as the 10-year Treasury yield climbed to its highest level since 2007. This rise in borrowing costs follows a brief overnight retreat from recent highs. Investors are also reassessing the AI sector after President Donald Trump dismissed recent calls for a technology slowdown as a hoax. He specifically targeted comments from Anthropic CEO Dario Amodei, asserting that the United States leads all other countries in AI development. Meanwhile, Microsoft published a provisional code of conduct to restrict future AI models, aligning with slower advancement calls from its partners OpenAI and Anthropic.

Bank of America fee outlook reverses

Moynihan’s guidance suggests the AI-driven advisory and trading boom on Wall Street may be waning. The bank’s weak outlook contrasts with the robust growth seen earlier in the year. Analysts interpret this as a sign that the current economic cycle is shifting away from the high-fee environment that benefited financial institutions. The drop in Bank of America stock reflects investor concern over sustained revenue pressure in the investment banking division.

Treasury yields hit multi-year peak

The ascent of the benchmark 10-year Treasury yield adds to macroeconomic headwinds for equity markets. Higher yields typically increase the cost of capital for corporations, potentially dampening investment and expansion plans. The yield’s move to levels unseen since 2007 occurred despite a temporary dip during the previous trading session. This trend complicates the outlook for sectors sensitive to interest rates, including technology and growth-oriented stocks.

AI sector faces regulatory and political pressure

Political and corporate stances on AI development are diverging. While the White House promotes aggressive expansion, major tech firms are implementing internal restrictions. Microsoft’s new code of conduct aims to limit the capabilities of its future models. This move follows similar calls for caution from Anthropic and OpenAI, both of which integrate their models into Microsoft’s Copilot assistant. The conflicting narratives create uncertainty for investors betting on rapid AI adoption and revenue growth in the sector.