Concerns after Moody’s downgrade
Banks pull Dow lower
8/8/2023 11:06 p.m
The rating agency Moody’s lowered the creditworthiness of various US banks, which put pressure on the banking sector on Wall Street. Weak economic data from China are also weighing on the mood. The winner of the day is the pharmaceutical company Eli Lilly.
Some US banks’ credit rating downgrades have Wall Street investors nervous. The Dow Jones Index the standard values closed 0.5 percent lower on Tuesday at 35,314 points. The tech-heavy one Nasdaq fell 0.8 percent to 13,884 points. The broad one S&P 500 lost 0.4 percent to 4499 points. The rating agency Moody’s has lowered the credit ratings for a number of medium-sized and smaller US financial institutions. At the same time, the agency announced that it might also downgrade some of the major banks.
“The last decision by Fitch on the creditworthiness of the USA seemed to have just been digested on the market, the next news of this kind ran over the ticker today,” said Konstantin Oldenburger, an analyst at broker CMC Markets. “However, Moody’s only explicitly formulates concerns that have been circulating for a long time and arose as a result of the banking crisis in March of this year. Without the events of the past week, today’s downgrade would probably have been acknowledged by investors with a shrug of the shoulders.”
The shares of the downgraded banks, including M&T bank, Pinnacle Financial Partners and BOK Financial Corp, lost between 1.4 and 2.1 percent. The titles of major banks also flew out of the depots Bank of New York Mellon and State Street, which Moody’s had placed on its checklist for possible downgrades. The share certificates fell 1.3 to 1.6 percent.
China concerns weigh on bond yields
Meanwhile, economic concerns about weak foreign trade data in China encouraged investors to invest in government bonds, which are considered “safe havens” in times of crisis. In contrast to the rising prices, yields fell. The yield on 10-year US bonds fell to 4.026 percent from 4.078 percent previously. China concerns sent US-listed shares of Chinese companies plummeting. The shares of Alibaba, pinduoduo, JD.Com and bilibili lost between 2.2 and 2.5 percent.
The strong demand for the diabetes drug Mounjaro spurred on the US pharmaceutical company Eli Lilly. The stock jumped almost 15 percent. Thanks to Mounjaro, the company has raised its guidance and now expects adjusted earnings of $9.70 to $9.90 per share for the current fiscal year.
On the other hand, the forecast was reduced UPS stock to. The title of the US parcel service crumbled by around one percent. The company now expects sales of $93 billion in 2023 and an adjusted operating margin of around 11.8 percent. It had previously assumed 97 billion and around 12.8 percent. The reason is a new collective agreement that regulates overtime for drivers and the recently weakening demand for online trade due to the faltering economy.