Minutes before the start of today’s session, U.S. stock futures are indicating a sharp decline at the open. In overnight trading, markets in Asia were mixed. Meanwhile, the major European indexes are all lower. Elsewhere, oil prices have also dropped, with West Texas Intermediate down 2.3%, to around $80.10 a barrel.
With yesterday’s rebound, Wall Street appeared to have shaken off last week’s downgrade of the United States’ credit rating by Fitch, and turned its attention back to corporate earnings season. Now, sentiment has changed course once again, after Moody’s lowered the credit ratings of 10 small- to mid-size banks. More concerning, the rating agency noted that several larger lenders, Including U.S. Bancorp (USB) and Bank of New York Mellon (BK) were being reviewed for a possible downgrade, while its outlook for 11 other banks, including Capital One Financial (COF), had been changed to negative. Moody’s cited growing profitability pressures, substantial unrealized losses, along with liquidity and capital risks for the reassessments.
The economic news docket for this week includes the Bureau of Labor Statistics release of the Consumer Price Index report for July, which is due out Thursday. This key inflation metric, which is closely watched by the Federal Reserve, is widely expected to come in flat with June’s increase of 0.2%. Meanwhile, consensus is calling for the 12-month figure to come in around 3.3%, which would be up from 3.0% the month before, but still well below the 9.1% registered in June of 2022. Meanwhile, the so-called “core” rate, which excludes food and energy, is expected to be edged down to 4.7%, versus 4.8% the month before. This will be followed up on Friday with last month’s reading for the Producer Price Index, where a slight uptick is expected, to 0.2% (versus 0.1% the month before). However, Wall Street is calling for the year-over-year change to advance more than half a percentage point, to 0.7%.
Summing up Monday’s market action, the Dow Jones Industrials Average gained 407 points, or 1.2%, the S&P 500 advanced 40 points (0.9%), and the tech-heavy NASDAQ moved 85 points higher (0.6%). - Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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