Market Analysis

Wall Street’s benchmark S&P 500 index closed 0.5% higher on Tuesday, though concerns over slowing economic growth limited further gains. Meanwhile, the Dow slipped as bank stocks tumbled following warnings of weaker current-quarter performance, and energy shares also declined sharply.

The energy sector led losses among the 11 industry groups in the S&P 500, dropping 1.9%, as crude oil prices fell after OPEC+ revised its demand forecast for 2024 and 2025 downward. Bank stocks were also hit hard after Goldman Sachs CEO David Solomon warned that trading revenue could decrease by 10% this quarter. Additionally, JPMorgan Chase (NYSE) lowered expectations for income from interest payments, contributing to the sector's decline.

Smaller consumer lender Ally Financial (NYSE) saw its shares plummet by 17.6% after its finance chief reported intensified credit challenges this quarter.

These warnings from banks overshadowed the Federal Reserve's announcement of plans to ease an earlier proposal to raise capital requirements for large banks. Lindsey Bell, chief strategist at 248 Ventures, noted that much of the market's activity was driven by concerns over banks lowering earnings expectations. The slowdown at JPMorgan, Goldman Sachs, and Ally Financial dominated the news as their reports indicated a fundamental weakening in their businesses.

Investors also worried about the broader economic implications of reduced energy demand, combined with uncertainty over the Federal Reserve's upcoming decision on interest rates. Additionally, the looming U.S. presidential election on November 5 added to the unease.

"We're seeing signs of slowing global economic growth, which adds to the uncertainty in the U.S. with the election cycle approaching," Bell said, predicting that September and October could be challenging months for stocks.

Election-related uncertainty was particularly in focus ahead of Tuesday night's televised debate between Democratic candidate Kamala Harris and Republican candidate Donald Trump, set to take place at 9 p.m. EDT.

John Augustine, chief investment officer at Huntington National Bank, highlighted three major factors influencing the market: growth concerns, low trading volumes, and the evening's presidential debate. However, Augustine questioned whether investors were overreacting by applying JPMorgan’s news to the broader economy.

The Dow Jones Industrial Average fell 92.63 points, or 0.23%, to 40,736.96, while the S&P 500 rose 24.47 points, or 0.45%, to 5,495.52. The Nasdaq Composite climbed 141.28 points, or 0.84%, to 17,025.88.

In Monday’s session, Wall Street's major indexes saw gains of over 1% as investors sought bargains following last week's heavy losses.

Looking ahead, investors will keep a close eye on Wednesday’s consumer price index inflation report and Thursday’s producer prices data.

The financial sector of the S&P 500 fell 1%, making it the second weakest on Tuesday and the largest drag in terms of index points. JPMorgan Chase dropped 5.2%, while Goldman Sachs declined by 4.3%.

In individual stock moves, Hewlett Packard Enterprise (NYSE) was the S&P 500’s biggest loser, down 8.5%, after announcing a $1.35 billion mandatory convertible preferred stock offering to fund its acquisition of Juniper Networks (NYSE).

On the other hand, Oracle (NYSE) surged 11.4%, leading the S&P 500's gainers, after surpassing quarterly earnings estimates.

Advancers outpaced decliners on the NYSE by a ratio of 1.15 to 1, with 390 stocks hitting new highs and 159 posting new lows.

On the Nasdaq, 2,130 stocks advanced while 2,014 declined, leading to a 1.06-to-1 ratio of advancing to declining issues. The S&P 500 saw 49 new 52-week highs and 13 new lows, while the Nasdaq recorded 48 new highs and 156 new lows.

U.S. exchanges saw 10.75 billion shares traded, in line with the 20-session moving average.

Paraphrasing text from "Investing" all rights reserved by the original author.