U.S. stocks finished lower Tuesday, though off session lows, as investors shunned assets viewed as risky following weak China international trade data for July and weighed the threat of a credit-rating downgrade on major U.S. banks.
How stocks traded
- The Dow Jones Industrial Average DJIA finished down 158.64 points, or 0.5%, to 35,314.49, after declining 466 points at its session low.
- The S&P 500 SPX closed down 19.06 points or 0.4% to 4,499.38
- The Nasdaq Composite COMP ended 110.07 points, or 0.8% lower to 13,884.32
The Dow rose 408 points, or 1.2%, on Monday, while the S&P 500 SPX gained 0.9% and the Nasdaq advanced 0.6%.
What drove markets
A risk-off tone swept global markets after weak China trade data heightened concerns about a slowing global economy, while Moody’s Investors Service downgraded the credit ratings of 10 banks and placed six banking giants on review for potential downgrades.
“Investors are responding to bank fears and China as one of the biggest engines of the global economy markedly reducing its activity at a time where the market was already frothy,” said Eric Schiffer, chief executive of The Patriarch Organization, a private-equity firm. “It will cause people to be more conservative.”
China’s exports fell 14.5% from a year earlier in July, the biggest decline since the outbreak of the COVID-19 pandemic in February 2020, while imports slid 12.4%, worse than forecast.
The news highlighted “that the world’s second biggest economy is being dragged lower by weakness in global demand and a domestic slowdown,” said Jim Reid, strategist at Deutsche Bank.
Meanwhile, Moody’s possible downgrade of six major U.S. banks added to concerns about the fragility of the financial sector as it deals with the sharp rise interest rates since March 2022. Bank stocks were lower, with the SPDR S&P Bank ETF KBE dropping 1.3%.
Stocks fell last week, with market watchers looking for continued consolidation after a strong 2023 rally led largely by megacap tech stocks that has seen the Nasdaq Composite rise more than 30% year to date while the S&P 500 advanced toward its record high from January 2022.
“We believe the market has entered a consolidation phase [within] an uptrend that will likely last 1-3 months with support at 4,328″ for the S&P 500, said Kevin Dempter, analyst at Renaissance Macro Research, in a Tuesday note.
“Patience will be the most important discipline for investors during this period especially [within] megacap tech given the overbought conditions and sentiment extremes in the space,” Dempter wrote. “Ideally, we would look to take advantage of oversold conditions in uptrends but with a focus on a longer-term trade horizon and not tactical.”
Data showed the U.S. trade deficit narrowed by 4.1% to $65.5 billion in July.
Philadelphia Fed President Patrick Harker said policy makers “may be at the point where we can be patient and hold rates steady.
Companies in focus
- Paramount Global shares PARA, +1.62% gained 1.6% after the media company’s adjusted earnings beating expectations as it also agreed to sell Simon & Schuster for $1.6 billion to KKR.
- Beyond Meat Inc. BYND, -14.27% shares tumbled 14% following an earnings report that included a 30% drop in revenue year-over-year for the struggling maker of plant-based meat items.
- Eli Lilly & Co. LLY, +14.87% shares shot up 15%, after the drug giant reported second-quarter profit and revenue that climbed above expectations and provided a big boost its full-year outlook, as results were helped by the $579 million received from the sale of rights for Baqsimi.
- United Parcel Service Inc. UPS, -0.88% shares dropped 0.9%, after the package delivery giant reported second-quarter revenue that fell short of expectations and cut its full-year outlook, citing the volume impact from labor negotiations.
- Billionaire Charlie Ergen is combining his two telecom companies, pay-TV provider Dish Network Corp. DISH, +9.55% and satellite-communications company EchoStar Corp. SATS, +1.02% in an all-stock deal, the companies said Tuesday, confirming an earlier report by The Wall Street Journal. Dish shares rose 10%, while EchoStar gained 1%.
- Novo Nordisk’s U.S.-listed stock NVO, +17.23% jumped 17% Tuesday, after the company said its obesity treatment semaglutide, marketed as Wegovy, met its main goal in a trial evaluating its ability to reduce cardiovascular events and not just help with weight loss.
— Jamie Chisholm contributed.