S&P 500 Rally Hits A Wall As Big Banks Sound Alarm: Markets Wrap
Treasury 10-year yields dropped five basis points to 3.65%. That’s ahead of a a $58 billion sale of three-year notes.
(Bloomberg) --Stocks struggled to make much headway after cautious outlooks from some of Wall Street’s biggest banks. Brent oil dropped below $70 as oversupply fears deepened.
Following a rally to start the week, the S&P 500 wavered. The KBW Bank Index sank 3%. JPMorgan Chase & Co. tumbled 7% as its President Daniel Pinto said analysts are being too optimistic in projecting next year’s expenses and net interest income. His remarks follow guidance from Goldman Sachs Group Inc.’s chief David Solomon Monday that his firm’s third-quarter trading revenue could fall 10%. The shares slumped 5%.
Traders also kept a close eye on news that regulators will make changes to their bank-capital rules proposal, cutting the expected impact to the biggest banks by half and exempting smaller ones from large portions of the measure. In the run-up to key inflation data, investors are also gearing up for the first debate between former President Donald Trump and Vice President Kamala Harris.
The S&P 500 fell 0.3%. The Nasdaq 100 dropped 0.2%. The Dow Jones Industrial Average slid 0.8%. A Bloomberg gauge of the “Magnificent Seven” megacaps climbed 0.3%. The Russell 2000 of small firms retreated 0.9%.
Treasury 10-year yields dropped five basis points to 3.65%. That’s ahead of a a $58 billion sale of three-year notes.
“If demand for the notes is weak, it could spark hawkish money flows while an auction outcome too strong could reignite recession worries,” said Tom Essaye at The Sevens Report. “More ‘wait-and-see trading’ is most likely for today’s session as traders await the latest inflation data — which has the potential to shift Federal Reserve policy expectations ahead of next week’s meeting.”
US equities are unlikely to slump 20% or more as the risk of a recession remains low against expected interest-rate cuts from the Fed, according to Goldman Sachs Group Inc. strategists.
The team led by Christian Mueller-Glissmann said while stocks could decline into the year end — hurt by higher valuations, a mixed growth outlook and policy uncertainty — the odds of an outright bear market are slim as the economy is also in part being supported by a “healthy private sector.”
Corporate Highlights:
Apple Inc. lost its court fight over a €13 billion ($14.4 billion) Irish tax bill and Google lost its challenge over a €2.4 billion fine for abusing its market power, in a double boost to the European Union’s crackdown on Big Tech.
Oracle Corp. soared after the software giant reported profit and bookings that topped estimates, signaling that artificial intelligence demand continues to boost its cloud computing business.
Southwest Airlines Co. Chairman Gary Kelly is stepping down along with six directors, a dramatic move after the carrier faced calls for a strategic overhaul from activist investor Elliott Investment Management.
BMW AG warned that a recall affecting some 1.5 million vehicles due to faults with their Continental AG braking systems will cut its profit this year, adding to the industrial crisis in Europe’s largest economy.
Volkswagen AG is ending job protections for auto workers in Germany as part of its cost-cutting push, setting up a showdown with unions as the country’s most important industry fights for its future.
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Key events this week:
US CPI, Wednesday
Japan PPI, Thursday
ECB rate decision, Thursday
US initial jobless claims, PPI, Thursday
Eurozone industrial production, Friday
Japan industrial production, Friday
U. Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.3% as of 11:58 a.m. New York time
The Nasdaq 100 fell 0.2%
The Dow Jones Industrial Average fell 0.8%
The Stoxx Europe 600 fell 0.5%
The MSCI World Index fell 0.4%
KBW Bank Index fell 3.2%
Bloomberg Magnificent 7 Total Return Index rose 0.3%
The Russell 2000 Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.1026
The British pound was little changed at $1.3067
The Japanese yen rose 0.6% to 142.31 per dollar
Cryptocurrencies
Bitcoin fell 0.6% to $56,679.55
Ether fell 0.5% to $2,328.87
Bonds
The yield on 10-year Treasuries declined five basis points to 3.65%
Germany’s 10-year yield declined four basis points to 2.13%
Britain’s 10-year yield declined three basis points to 3.82%
Commodities
West Texas Intermediate crude fell 4.6% to $65.54 a barrel
Spot gold rose 0.2% to $2,512.31 an ounce
This story was produced with the assistance of Bloomberg Automation.
© 2024 Bloomberg L.P.
