The battle against inflation is being won by the Fed — even if it doesn't appear that way to Mr. Market right now.
"The reality is that they [the Fed] have got to win the war on inflation, and they are winning, and it's coming down. They have got it on the right trend," Bank of America chairman and CEO Brian Moynihan told Yahoo Finance.
Added Moynihan, "The past would tell you it would take a longer period of time, especially when they started late."
There continues to be great focus on what Fed chief Jerome Powell said on Tuesday, that it will "take longer than expected" to get inflation down to Federal Reserve's 2% target. This comes as the latest economic data, such as retail sales and consumer prices, have surprised to the upside.
Lost in the Powell focus, though, were even more hawkish comments from Fed vice chair Philip Jefferson the same day.
“If incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer. I am fully committed to getting inflation back to 2%," Jefferson said.
In the wake of this commentary, fed funds futures are now pricing in only 40 basis points of rate cuts by year-end. Deutsche Bank pointed out this is the lowest this has been so far this cycle.
Despite sticky inflation and more volatile markets, BofA managed to post an OK first quarter. But, pressure from higher charge-offs and softening credit quality did catch the attention of some on Wall Street.
Net interest income fell 3% to $14 billion compared to the year-earlier period, roughly in line with consensus forecasts. Adjusted earnings of $0.83 a share beat analysts' estimates of $0.77 but dropped from $0.94 a year earlier.
Net charge-offs increased to $1.5 billion from $807 million a year ago.
Revenue fell 2% from the prior year to $25.8 billion, despite top-line gains in wealth management, investment banking, and sales and trading.
On an earnings call with analysts, BofA hinted the first quarter would be the low point for the bank's key net interest income line — the difference between what banks pay on deposits and earn on loans.
In support of that, BofA's net interest income did improve by 1% sequentially in the first quarter and is projected to increase in the second half of 2024, BofA said.
Shares still fell about 4% during Tuesday's session but recovered by 3% on Wednesday.
The stock was largely defended by Wall Street analysts following the Tuesday sell-off.
"We get being bummed out about banks in this rising rate backdrop (which hopefully doesn’t last), but feel BofA’s strong capital markets performance, ongoing expense discipline, $31 billion and growing excess capital and multiple source of organic growth should continue to underpin a stable and steadily climbing top line, and therefore the stock," Evercore ISI Glenn Schorr wrote in a client note.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected]. Are you a CEO and want to come on Yahoo Finance Live? Email Brian Sozzi.
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