Bank of America stock is down 9.42% on the session. The Dow Jones is trading down nearly 300 points. S&P 500 down 3.14%. Nasdaq is down 3.34%. Gold is trading at $1,703 per ounce.
Update: Dow Jones is now down about 360 points. Bank of America is down 10% since opening bell. Nasdaq is now down more than 4%. Dow Jones down 373 points. Gold has moved up $50 per ounce today alone.
Bank of America stocks tumbled 20 percent on Monday as investors reacted in part to a $10 billion lawsuit that the insurance corporation American International Group brought against the company.
The dramatic single-day drop was reminiscent of market plunges during the financial crisis of 2008, and stood out even amongst a market-wide spate of sell-offs that left the Dow Jones industrial average more than 600 points down on the day.
BofA closed at $6.51 on Monday, a 20.32 percent drop from the opening bell, after a day of rapid stock declines that saw the Dow shed 634 points. The Dow closed at 10,809 after dipping below 11,000 for the first time since November 2010, making Monday the sixth-worst trading day in Dow history.
Elsewhere in the market, the S&P 500 Index fell by 6.66 percent and the NASDAQ Composite closed at 6.9 percent down.
On Monday, AIG announced that it was suing Bank of America for more than $10 billion, alleging that BofA, and its acquisitions Merrill Lynch and Countrywide Financial, participated in “massive fraud” when they sold mortgage-backed securities to AIG between 2005 and 2007. AIG says that more than 40 percent of the mortgages were presented as being more secure than they actually were.
A spokesman for Bank of America has countered that AIG “is the very definition of an informed, seasoned investor” and should be held responsible for any purchases it made.
The slide in BofA stocks, the worst since April 2009, was reflected in declines among other major lenders. Citigroup was down 16 percent at the end of the day, Morgan Stanley closed down 14 percent, JPMorgan and Wells Fargo were each down 9 percent and Goldman Sachs fell 6 percent.
AIG’s own stock fell 10 percent to $22.58. boa, apple stock, bb t, aig, merrill lynch
Bank of America, the country’s largest banks by assets, has seen the value of its stock decline by 54 percent since the start of 2011. Last month, BofA reported losses of $8.8 billion in the second quarter, its worst quarterly earnings report ever.
On Wednesday, BofA CEO Brian Moynihan will answer shareholder questions during a 90-minute conference call. A press release from Fairholme Capital Management, a major shareholder with BofA, says that “skeptics are invited to participate.”
Monday’s market plunge is seen as a response to Standard & Poor’s historic downgrade of the United States’ credit rating last Friday, as well as concerns that Italy and Spain could slip into default as part of the worsening European debt crisis. Investors have also seen a series of disappointing economic reports in recent days, raising fears that the U.S. economy may be headed for a double-dip recession.
NEW YORK (CNNMoney) -- Bank of America shares plunged 20% Monday, fueled in part by a steep selloff in the broader market and news that insurer American International Group is suing it for billions of dollars over alleged mortgage securities fraud.
Bank of America (BAC, Fortune 500), the nation's largest bank, tumbled more than 20% while shares of AIG (AIG, Fortune 500) fell 10% on Monday. Bank of America has already lost nearly 49% of its value this year, while AIG has tumbled more than 59%.
Richard Staite, analyst with Atlantic Equities, said there were two main catalysts for Monday's selloff in Bank of America's stock.
First, the slump in Bank of America's stock is being triggered by more than just the AIG news. It's part of a broader market selloff that took other banking stocks down with it.
Citigroup (C, Fortune 500) shares fell 15.7%, JP Morgan Chase (JPM, Fortune 500) slumped almost 8.7%, Wells Fargo (WFC, Fortune 500) fell 9% while shares of Regions Financial (RF, Fortune 500) tumbled 13.5%.
Second, investors are losing confidence in Bank of America, he said boa, apple stock, bb t, aig, merrill lynch .
"Management has tried to reassure investors over the course of the last six months that they are getting on top of the mortgage problem but investors are very skeptical," he said, adding that there's really nothing that Bank of America can do to stop its stock price from falling.
There was more bad news for Bank of America. Credit default swaps (CDS) tied to its debt were at their highest level since May 2009.
Credit default swaps reflect the interest rates that Bank of America has to pay to borrow money. If they keep rising, Staite said it would exacerbate investor concerns about whether the company has enough liquidity to run its business.
Dow plunges 630 points after S&P downgrade
Hoping to allay those concerns, Bank of America spokesman Jerry Dubrowski said the company has no plans to raise additional capital. "We have enough capital to operate the business and execute our business strategy," he said.
Staite also said said he is not overly concerned about Bank of America facing a liquidity crunch anytime soon.
Separately, AIG is suing Bank of America's for alleged fraudulent activity that it claims "caused billions of dollars in damage" to its business.
AIG's lawsuit is specifically tied to hundreds of mortgage-backed securities that the insurer claims Bank of America -- and its Merrill Lynch and Countrywide Financial units -- knew were not top quality, according to published reports.
The insurer is seeking to recover more than $10 billion in losses from Bank of America on $28 billion of investments, in what could be the largest mortgage-security-related action filed by a single investor, the reports said.
"We are bringing this suit today to protect AIG and the taxpayers' stake in it," AIG spokesman Mark Herr said in a statement.
Bank of America responded to the lawsuit by saying that AIG "recklessly chased high yields and profits throughout the mortgage and structured finance markets."
"It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors. We reject its assertions and allegations," Dubrowski said in a statement.
AIG's Herr said Bank of America's comment was "disappointing but unsurprising."
0:00 / 1:04 AIG sues BofA for $10 billion
"Investors, no matter how sophisticated, were entitled to rely on [Bank of America's] numerous written representations about the securities it sold," he said. "Now that it is clear that those representations were false, Bank of America must be held to account."
Back of America received billions of dollars in federal bailout funds through the government's Troubled Asset Relief Program (TARP) during the crisis of 2008.
In December 2009, Bank of America paid back all of the $45 billion in bailout money.
boa, apple stock, bb t, aig, merrill lynch The government also gave AIG a $182 billion lifeline to keep the insurance company out of bankruptcy at the height of the financial crisis.
That lifeline was offered in exchange for a near-80% stake in the insurer. AIG has paid back a portion of its loan, and the Treasury Department holds the rest in public shares, which it plans on selling over time.
In May, AIG sold 100 million shares, while Treasury sold 200 million shares. The government still owns almost 80% of the insurer.
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