FX.co ★ Wall Street on the Edge: When Banking Ratings Shake the Foundation

Significant changes occurred with 10 medium-sized banking institutions, whose ratings went down by one notch. In addition, six of the largest banks, including Bank of New York Mellon, US Bancorp, State Street, and Truist Financial, were under close scrutiny by Moody's for further review.

While the banking sector felt the pressure, the pharmaceutical industry lit up with good news. Thanks to successes in developing an obesity drug, Novo's shares went up. Eli Lilly also brings its share of optimism to the market, reaching record highs due to impressive profit reports.

However, not everything was smooth sailing. UPS faced challenges, cutting its annual revenue forecast due to falling demand. Overall, the indices showed the following picture: Dow decreased by 0.45%, S&P went down by 0.42%, and Nasdaq lost 0.79%. This day reminded investors that even Wall Street's sturdy foundation can be subject to external influences. All that remains is to hope that the current turbulence will soon subside.

Following the shock wave of bankruptcy of three creditors at the beginning of the year, which significantly shook the US financial world and even impacted giants like Silicon Valley Bank, the market's trust in banks showed signs of recovery. However, recent events suggest that this trust is far from being stable. The numbers confirm this: the S&P 500 Banks index (.SPXBK) has fallen by 2.5% since the beginning of the year, while the main S&P 500 index has risen by an impressive 17.2%. The recent ratings downgrade underscores how fragile investor confidence remains in financial stocks. Specifically, on Tuesday, the banking index went down by 1.1%, and the KBW regional banks index (.KRX) lost 1.4%.

Many major banks felt the pressure. Shares of giants such as Goldman Sachs and Bank of America each dropped about 1.9%, Bank of New York Mellon lost 1.3%, and Truist shares went down by 0.6%. Jason Pride of Glenmede notes that Moody's actions aren't just a formality. It's a clear expression of the agency's concern about the current state of the banking system and its potential impact on the overall economic situation. As a result of this news, the CBOE market volatility index (.VIX), which serves as Wall Street's "fear barometer," showed an increase, at one point reaching its two-month peak. All of this reminds us that trust is a fragile thing, especially when it comes to finances.

On Monday, Wall Street indices suffered a decline, with Dow Jones losing 158.64 points (0.45%), dropping to 35,314.49, the S&P 500 went down 19.06 points (0.42%) to 4,499.38, and Nasdaq lost 110.07 points (0.79%), reaching 13,884.32. Out of the 11 key sectors of the S&P 500, eight suffered. Although financial stocks, as expected, took the hardest hit, materials and consumer goods sectors also felt significant pressure. However, not everything was bleak. The energy sector, initially depressed by poor trade data from China, ultimately went up by 0.5%, thanks to rising oil prices amid more optimistic economic forecasts from the US.

In the pharmaceutical world, it was a good day: shares of Novo Nordisk, a Danish manufacturer, surged 14.9% after announcing that their drug Wegovy might aid in combating heart diseases. Among other winners of the day was Dish Network, whose shares rose by 9.6% following the announcement of merger plans with EchoStar, whose shares also went up by 1%. But, as always on Wall Street, where there are winners, there are losers. United Parcel Service shares dropped 0.9% after the company downgraded its forecasts. By the end of the day, US trading volume reached 10.94 billion shares, aligning with the average over the last 20 trading days. It's also interesting to note that the S&P 500 recorded 13 new 52-week highs and 17 new lows, while Nasdaq registered 46 new highs and a whopping 195 new lows. In the commodity market on Monday, gold futures for December delivery faced pressure, declining by 0.54% or $10.60, hitting the mark of $1.00 per troy ounce. Such a sharp drop may raise questions since gold rarely costs so little, and this data likely requires verification or correction.

Meanwhile, oil futures showed positive momentum. WTI crude oil futures for September delivery increased by 1.04% or $0.85, reaching a level of $82.79 per barrel. Brent crude oil futures for October delivery also moved up, adding 0.81% or $0.69, settling at $86.03 per barrel. On the currency front, no significant changes were observed. The EUR/USD pair showed a minimal change, decreasing by 0.43% to the 1.10 level. Meanwhile, the USD/JPY quotes exhibited growth, increasing by 0.62% to a mark of 143.38. It's also worth noting that the U.S. dollar index (USD) futures displayed an upward trend, rising by 0.49% and reaching the mark of 102.36. These movements reflect the overall picture of the global markets at the moment, where investors assess various economic and geopolitical factors in determining their investment strategy.