Wall St ends lower after bank rating cuts spark wider sell-off…..
All three major Wall Street benchmarks finished lower on Tuesday in a broad sell-off after the downgrading of several lenders by credit rating agency Moody’s reignited fears about the health of U.S. banks and the economy. After a five-month rally pushed the benchmark S&P 500 <.SPX> and Nasdaq Composite <.IXIC> within 5% of their lifetime highs, August has now recorded five losing sessions out of six. The S&P is down 2% this month, with the Nasdaq dropping 3.2%.
Tuesday’s decline was triggered after the agency cut ratings on 10 small- to mid-sized lenders by one notch and placed six banking giants, including Bank of New York Mellon , U.S. Bancorp , State Street and Truist Financial on review for potential downgrades. Moody’s also warned that the sector’s credit strength would likely be tested by funding risks and weaker profitability. Market confidence in U.S. banks has been gradually returning after the failures of three lenders earlier this year, including Silicon Valley Bank, shocked the financial system.
The S&P 500 Banks index <.SPXBK> has slipped 2.5% year to date, compared with a 17.2% gain by the S&P 500, and the downgrades exposed the fragility of investors’ confidence towards financial stocks. The banks index slid 1.1% on Tuesday, while the KBW Regional Banking index <.KRX> dipped 1.4%. Big banks Goldman Sachs and Bank of America each eased around 1.9%, while Bank of New York Mellon dropped 1.3% and Truist fell 0.6%. Reaction to the bank downgrades pushed up the CBOE Market Volatility index <.VIX>, Wall Street’s fear gauge, at one point hitting a two-month high.
The Dow Jones Industrial Average <.DJI> fell 158.64 points, or 0.45%, to 35,314.49, the S&P 500 <.SPX> lost 19.06 points, or 0.42%, at 4,499.38 and the Nasdaq Composite <.IXIC> dropped 110.07 points, or 0.79%, to 13,884.32. Eight of the 11 major S&P 500 sectors fell. While financials <.SPSY> was, understandably, one of the biggest decliners, materials <.SPLRCM> and consumer discretionary <.SPLRCD> also weighed heavily. The energy <.SPNY> index overcame an initial slump, caused by disappointing trade data from top-consumer China weighing on crude prices, to trade 0.5% higher. It rebounded along with oil prices after a U.S. government agency projected a rosier economic outlook. [
Healthcare shares also advanced, supported by Eli Lilly jumping 14.9% to a record close on news of its upbeat quarterly profits. Drug makers globally rose after Denmark-based Novo Nordisk said its obesity drug, Wegovy, reduced the risk of heart disease. Dish Network jumped 9.6% as the pay-TV provider disclosed plans to merge with satellite communications vendor EchoStar , which also rose 1%. United Parcel Service slipped 0.9% after the U.S. economy bellwether cut its annual revenue forecast.
Volume on U.S. exchanges was 10.94 billion shares, in line with the average over the last 20 trading days. The S&P 500 posted 13 new 52-week highs and 17 new lows; the Nasdaq Composite recorded 46 new highs and 195 new lows.
Reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru and David French in New York; Editing by Sriraj Kalluvila, Vinay Dwivedi and Richard Chang.
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