Dow slides more than 300 points as Moody’s bank downgrade adds to August woes

 Stocks retreated Tuesday as an August sell-off was reignited by a downgrade of the banking sector by credit rating agency Moody’s.

The Dow Jones Industrial Average was down 342 points, or 1%, led by a decline in Goldman Sachs

. The S&P 500 dipped 1.1%, bringing its pullback from its late-July high to more than 3%. The benchmark is down more than 2.6% for August. The Nasdaq Composite pulled back by 1.5%.

Banks fell broadly after Moody’s downgraded the credit rating on several regional banks, including M&T Bank and Pinnacle Financial, citing deposit risk, a potential recession and struggling commercial real estate portfolios. The credit agency also placed Bank of N.Y. Mellon and State Street on review for a downgrade.

Goldman Sachs and JPMorgan Chase traded more than 3% and 2% lower, respectively, while the SPDR S&P Bank ETF (KBE) dropped more than 3%.

The SPDR S&P Regional Banking ETF (KRE) also slid more than 3%. M&T Bank also fell 3.5%. The regional bank ETF lost 28% in March amid the failure of Silicon Valley Bank.

“It’s not optional to have good credit ratings, because they need faith,” said Jay Hatfield, CEO of Infrastructure Capital Advisors, of regional banks. “Any sort of reduction of faith in the regional banking system is really terrible for market sentiment.”

Traders also parsed through the latest batch of earnings. UPS shares dropped more than 1% after the delivery giant reported weaker-than-expected revenue for the second quarter. The company also lowered its full-year revenue outlook.

The corporate earnings season has so far been better-than-anticipated. With 89% of S&P 500 stocks done reporting quarterly results, about four-fifths of them have beaten Wall Street’s expectations, according to FactSet. But it appears a lot of those results were already priced into the market, given the pullback the last two weeks.

Investors got a short respite from the selling on Monday with the 30-stock Dow posting its best day since June 15. But that comeback proved short-lived.

Second-quarter earnings season is nearing a close, with results out so far from 89% of the S&P 500

.

Of the nearly 450 companies that have reported results, 79% have topped earnings expectations while 63% have surpassed revenue estimates, according to Refinitiv.

For the period, earnings are expected to decline 3.8% from a year ago.

Some on Wall Street express cautious sentiments about the stock market.

Credit Suisse global equity strategist Andrew Garthwaite said he’s now more “incrementally more negative” on stocks. He also said a recession would likely hit next year.

Meanwhile, Bank of America’s Stephen Suttmeier said a tactical correct is already underway.

And Marko Kolanovic, JPMorgan’s top stock picker, recommended investors should stay underweight on equities, while noting people may be too optimistic about the state of the economy.

https://www.cnbc.com/2023/08/07/stock-market-today-live-updates.html