bank stocks fell sharply tuesday as worsethanexpected inflation data sparked a spike in treasury yields and a drop in stock prices while clouding the outlook for big financial institutions that hold bonds jpmorgan chase  co jpm fell 33 goldman sachs group inc gs dropped 36 morgan stanley ms subtracted 32 wells fargo  co wfc retreated by 46 and citigroup inc c declined by 29 the dow jones industrial average djia gave up 26 and the sp 500 spx weakened by 3 the financial select spdr etf xlf dropped 28 and the kbw nasdaq bank index bkx dropped by 3 also read dow down over 800 points as hot august consumer price index sends stocks skidding while higher interest rates typically benefit banks’ net interest income by allowing them to charge more for loans tuesday’s bearish consumer price index also caused more uncertainty among banks that hold large bond portfolios as prices of bonds fell also read 2year treasury yield surges to highest level in 14 years on august inflation surprise weaker bond prices cause banks to book unrealized losses on the value of their bond portfolios and in turn cause bank capital ratios to decline treasury prices move in the opposite direction to yields while higher rates have been boosting bank’s net interest income bank stocks have been weak in 2022 partly because of worries that inflation will continue to cool the economy and reduce economic activity which in turn impacts activity in the financial sector “rising interest rates longer asset maturities and high levels of securities on bank balance sheets may present challenges for the banking industry in coming quarters” acting fdic chief martin j gruenberg said last week in the government’s quarterly bank profit summary in another complication in the banking sector total deposits in the second quarter declined for the first time since the second quarter of 2018 the decline totaled 390 billion a record to 19563 trillion in the second quarter ended june 30 down from 19932 trillion in march while banks still have more deposits than they want the wall street journal reported that outflows in deposits will likely spark questions over the impact on the banking system from the fed’s attempts to tame inflation the overall uncertainty in the economy will do little to stop a nascent effort by banks and other lenders to trim staff the job impact was initially felt by mortgage lenders as higher interest rates discouraged home buying earlier this year now with initial public offerings and other capital market deals on hold investment banking is also expected to generate job losses see now this aig spinoff is the biggest ipo of the year at just 18 billion in a sign of the deep freeze in new offerings goldman sachs group inc is moving to trim hundreds of investment bankers and other staff by reintroducing its traditional annual performance reviews according to a source familiar with the banks wells fargo  co jpmorgan chase  co and citigroup inc are all shedding jobs as well in their mortgage businesses and other units that’s a reversal from the second quarter when head count numbers climbed also read 20 bank stocks expected to benefit the most from rising interest rates as the federal reserve fights inflation