US STOCKS-Wall St ends lower; strong retail sales stoke fears of high US rates

PacWest Bancorp

15/08/2023 21:00

(Updated at 4 pm ET/ 2000 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
    

  
    By Saeed Azhar, Amruta Khandekar and Shristi  Achar A
       NEW YORK, Aug 15 (Reuters) - Wall Street's main stock
indexes closed lower 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 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 rates. The U.S. Treasury yield curve
has been inverted for over a year, with longer-term bonds
yielding less than short-term debt instruments. This persistent
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.
    "That would end up curtailing lending because even if you
were my brother-in-law, I wouldn't want to lend to you at a
loss."
    
      
    According to preliminary data, the S&P 500  .SPX  lost 51.60
points, or 1.15%, to end at 4,438.12 points, while the Nasdaq
Composite  .IXIC  lost 155.81 points, or 1.13%, to 13,632.52.
The Dow Jones Industrial Average  .DJI  fell 356.33 points, or
1.01%, to 34,951.30.
    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 sharply.
    "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 were 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  slipped after
the Federal Deposit Insurance Corp's latest regulatory overhaul
proposal.
    The S&P 500 banking index  .SPXBK  hit a one-month low,
while the KBW regional banking index  .KRX  also plunged.
    All 11 major S&P 500 sectors declined, with energy stocks
 .SPNY  leading losses on weaker crude prices. 
    Technology stocks  .SPLRCT  fared better, thanks to gains in
shares of Nvidia  NVDA.O  after UBS and Wells Fargo lifted their
price targets on the stock. 
    Nvidia 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.
        U.S.-listed shares of Chinese companies also dropped
with e-commerce firm Alibaba Group  BABA.N  among those leading
the slide after another round of disappointing economic data
from 
  
   Among other stocks, General Motors  GM.N  fell 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 of both companies
gaining.

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S&P 500 components so far in 2023    https://tmsnrt.rs/445rjgx
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 (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;))