THE GIST (“THE WHAT”)
Moody’s lowered credit ratings for ten small and medium sized banks, reigniting health concerns of U.S. banks and triggering a sell-off in regional stocks that lead the broader market lower. Weaker-than-expected China’s export numbers stoked global recessionary concerns, further dampening sentiment at the open. The S&P 500 index tumbled during the early hours but clawed back some of the losses following dovish comments by Philadelphia Fed President Harker, closing the session well off the day’s lows at 4499.38 with a modest loss of 19.06 points (-0.42%).
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Trading Plans for TUE. 08/08: Markets Struggling to Find a Direction
For the last published Results of the Morning Trading Plans, please click here
THE DETAILS (The “How & Why”):
Regional banks tumbled at the open following reports that Moody’s Investors Service cut the credit ratings for ten small and medium sized U.S. banks while adopting a negative outlook for eleven other lenders, citing rising funding costs and growing asset risks due to the large corporate real estate exposure.
European bank stocks were also sold-off after the Italian government announced a one-off 40% tax on bank profits. Huntington Bancshares, Fifth Third Bancorp, PNC Financial Services Group, Citizens Financial Group, M&T Bank, Northern Trust, Franklin Resources, Bank of New York Mellon, and Cincinnati Financial Corp traded lower during the early hours but closed the session well off their lows.
China’s exports fell 14.5% year-on-year, registering its biggest decline in nearly three and a half years. China’s imports also fell by 12.4% year-on-year, as against the expected decline of 5.6%, reigniting global recessionary concerns and sending global bond yields lower. Dovish comments by Philadelphia Fed President Harker, however, helped erase some of the day’s losses after he indicated that the Fed could be more patient and hold interest rates steady as long as there is no alarming new data. The 10-year U.S. Treasury yield fell to a one week low of 3.982% and settled 7.1 basis points lower at 4.018%.
Amongst the worst decliners of the session, International Flavors & Fragrances Inc plunged 19.36% after it cut sales outlook and reported a jump in inventory cost by more than double. Sealed Air Corp was another big decliner, falling 9.51% after reporting a weaker-than-expected quarterly and slashing its full-year net sales forecast.
On the bullish side, Eli Lilly soared 14.87% after the company beat earnings estimates and announced that its experimental Alzheimer’s treatment significantly slowed cognitive decline in people with an early stage of the disease. Organon and Broadridge Financial Solutions were the other strong gainers on the back of strong quarterly earnings, both jumping 9.04% and 6.49%, respectively.