US STOCKS-US stocks fall as retail sales add to rate uncertainty, banks drop

PacWest Bancorp

15/08/2023 20:02

(Updated at 2:15 pm ET/ 1815 GMT)

        * 
      July retail sales rise more than expected
    

        * 
      Nvidia gains as UBS, Wells Fargo raise PT
    

        * 
      U.S. big banks fall as a report warns of downgrades
    

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      Indexes down: Dow 0.84%, S&P 0.9%, Nasdaq 0.81%
    

  
    By Amruta Khandekar, Shristi  Achar A and Saeed Azhar
       Aug 15 (Reuters) - Wall Street's main stock indexes fell
on Tuesday after stronger-than-expected retail sales data stoked
worries interest rates could stay higher for longer, while U.S.
big banks dropped on a report that Fitch could downgrade some
lenders.
    The Commerce Department's report showed retail sales grew
0.7% last month against expectations of a 0.4% rise, suggesting
the U.S. economy remains strong.
    After the data, traders' bets of a pause on hikes by the
Federal Reserve next month stayed intact at 89%, yet analysts
said investors were worried rates could stay at current levels
longer than anticipated.
        Banks saw the brunt of the selling as investors grew
more anxious about interest rate uncertainty. The 
    U.S. Treasury yield curve inverted,
     with longer-term bonds yielding less than short-term debt
instruments. This unusual situation pressures profits that banks
can earn on loans.
  
        "We would probably end up with an inverted yield curve
for longer than anticipated, even if we don't end up with an
economic recession," said Sam Stovall, chief investment
strategist at CFRA Research.
  
    
      
    
  
    A report said ratings agency Fitch could downgrade multiple
banks. Shares of JPMorgan Chase  JPM.N , Bank of America  BAC.N 
and Wells Fargo  WFC.N  fell between 2.3% and 2.9%.
    "The story from Fitch about potential downgrades to multiple
U.S. banks (is) weighing on sentiment," said Michael James,
managing director of equity trading at Wedbush Securities.
    "You combine that with the retail sales figures this morning
that we're a little hotter than estimates, (it) furthers the
potential higher for longer rates scenario from the Fed." 
    Shares of regional lenders PacWest Bancorp  PACW.O , Zions
Bancorp  ZION.O  and Western Alliance Bank  WAL.N  fell between
3.2% and nearly 5% after the Federal Deposit Insurance Corp's
latest regulatory overhaul proposal.
   The S&P 500 banking index  .SPXBK  hit a one-month low, last
down 2.65%, while the KBW regional banking index  .KRX  slipped
3.25%.
    All major 11 S&P 500 sectors declined, with energy stocks
 .SPNY  leading losses on weaker crude prices.  O/R  
    Technology stocks  .SPLRCT  fared better, thanks to a 1.6%
rise in shares of Nvidia  NVDA.O  after UBS and Wells Fargo
lifted their price targets on the stock. 
    Nvidia had posted its biggest one-day percentage gain since
late May in the previous session following bullish comments from
Morgan Stanley, with analysts also saying investors were piling
into the stock in the run-up to its earnings next week.
    
      
    
    cut key policy rates
    
      
    
  
    At 2.08 pm ET, the S&P 500  .SPX  was down 40.26 points, or
0.90%, to 4,449.46 and the Nasdaq Composite  .IXIC  dropped
111.85 points, or 0.81%, to 13,676.49, while the Dow Jones
Industrial Average  .DJI  fell 297.51 points, or 0.84%, to
35,010.12, 
   Among other stocks, General Motors  GM.N  fell almost 2%
after Berkshire Hathaway  BRKa.N  cut its stake in the
automaker.
    Warren Buffett's Berkshire disclosed a new investment in
homebuilder D.R. Horton  DHI.N , whose shares rose 3.3%, and
Lennar Corp  LEN.N , which rose 2.2%. 
    Declining stocks outnumbered rising ones within the S&P 500
 .AD.SPX  by a 9.7-to-one ratio.
    The S&P 500 posted 3 new highs and 17 new lows; the Nasdaq
recorded 40 new highs and 178 new lows.

 (Reporting by Amruta Khandekar, Shristi Achar A and Shashwat
Chauhan and Saeed Azhar; additional reporting by Davide
Barbuscia; Editing by Maju Samuel, Vinay Dwivedi and David
Gregorio)
 ((Amruta.Khandekar@thomsonreuters.com;
Shristi.AcharA@thomsonreuters.com;))