US STOCKS-Wall St ends lower; strong retail sales stoke interest rate worries

PacWest Bancorp

15/08/2023 21:43

(Updates with S&P's 50-day average milestone on paragraph 8)

        * 
      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
    

        * 
      Indexes end: S&P 500 -1.16%, Nasdaq -1.14%, Dow -1.02%
    

  
    By Saeed Azhar, Amruta Khandekar and Shristi  Achar A
       NEW YORK, Aug 15 (Reuters) - Wall Street's main stock
indexes closed sharply 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."
    The S&P 500 dropped 1.16% to end the session at 4,437.86
points.
        The S&P 500 closed below its 50-day moving average for
the first time since March.
  
    The Nasdaq declined 1.14% to 13,631.05 points, while Dow
Jones Industrial Average declined 1.02% to 34,946.39 points.
    Volume on U.S. exchanges was relatively light, with 10.1
billion shares traded, compared to an average of 10.9 billion
shares over the previous 20 sessions.
    A report said ratings agency Fitch could downgrade multiple
banks. Shares of JPMorgan Chase  JPM.N  fell 2.5%, Bank of
America  BAC.N  fell 3.2% and Wells Fargo  WFC.N  dropped 2.3%.
    "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
between 3.7% to 4.5% after the Federal Deposit Insurance Corp's
latest regulatory overhaul proposal.
    The S&P 500 banking index  .SPXBK  hit a one-month low, down
2.75%, while the KBW regional banking index  .KRX  also plunged
3.4%.
    All 11 major S&P 500 sectors declined, with energy stocks
 .SPNY  leading losses on weaker crude prices. 
    Technology stocks  .SPLRCT  fared slightly better, thanks to
0.4% rise 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 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  down 2% and among those
leading the slide after another round of disappointing economic
data from 
    Among other stocks, General Motors  GM.N  fell 2.3% 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 , which ended 2.9% higher.
    Declining issues outnumbered advancing ones on the NYSE by a
5.24-to-1 ratio; on Nasdaq, a 2.54-to-1 ratio favored decliners.
    The S&P 500 posted 3 new 52-week highs and 19 new lows; the
Nasdaq Composite recorded 45 new highs and 198 new lows.  

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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;))