[New York Stock Market] US Bank Stocks Plunge Amid China Slump... Major 3 Indexes Fall Over 1%

The three major indices of the U.S. New York stock market all closed lower on the 15th (local time) due to weak bank stocks following disappointing Chinese economic indicators and a series of downgrade warnings from Fitch. The retail sales data, a pillar of the U.S. economy, exceeded expectations, confirming market concerns that the Federal Reserve's (Fed) tightening could be prolonged.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 361.24 points (1.02%) from the previous close to finish at 34,946.39. The large-cap focused S&P 500 index dropped 51.86 points (1.16%) to 4,438.86, and the tech-heavy Nasdaq index declined 157.28 points (1.14%) to close at 13,631.05.

All 11 sectors of the S&P 500 index fell. Notably, energy, financials, and materials stocks saw significant declines. Fitch warned that dozens of banks, including JPMorgan Chase, might need to be downgraded, leading to broad weakness in bank stocks. JPMorgan fell 2.55% from the previous close. Citigroup and Wells Fargo also recorded declines in the 2% range. The SPDR S&P Regional Banking ETF dropped more than 3%. Meanwhile, Nvidia, which surged over 7% the previous day, closed slightly higher. Amgen rose nearly 2%. Home Depot showed slight gains after its pre-market earnings per share exceeded expectations. In contrast, Target and Walmart, both awaiting earnings reports this week, fell 2.55% and 0.51%, respectively.

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Investors closely monitored corporate earnings announcements, key economic indicators, and bank stock movements. The U.S. July retail sales data, released before the market opened, surpassed market expectations. According to the U.S. Department of Commerce, July retail sales increased by 0.7% from the previous month, marking the fourth consecutive month of growth. This was the largest increase in the past six months and significantly exceeded the expert forecast of a 0.4% increase compiled by The Wall Street Journal (WSJ). Core retail sales, excluding automobiles, rose 1.0% from the previous month.

This indicator came amid a clear easing trend in inflation indicators such as the Consumer Price Index (CPI), raising hopes for a so-called "soft landing." However, such robust consumption data could also support the need for the Federal Reserve (Fed) to maintain high interest rates for a longer period. Lindsay Piegza, chief economist at Stifel Financial, commented on the data, saying, "Thanks to consumer resilience, optimism about a soft landing will be strengthened," while adding, "At the same time, this means the Fed will need to keep interest rates high for longer."

On the other hand, the New York Empire State Manufacturing Index for August, released the same day, fell to -19. This is well below July's 1.1 and the Dow Jones estimate of -1.4. The index gauges expansion and contraction based on zero. However, the business conditions index, which reflects economic expectations six months ahead, rose to 19.9 from 14.3 the previous month, marking the highest level in a year. The August housing market sentiment index, also released on the same day, dropped 6 points to 50 from the previous month, marking a decline for the first time in eight months and falling short of Wall Street's forecast of 57.

Earlier, China's July retail sales and industrial production also came in worse than expected. Additionally, the People's Bank of China surprised markets by cutting policy rates, intensifying concerns over the Chinese real estate crisis. Recently, anxiety has been rising due to a default crisis triggered by the large real estate developer Country Garden (Biguoyuan). China's announcement to suspend unemployment rate releases also suggested severe local unemployment, adding to fears of economic slowdown. Scott Landers, Chief Investment Officer at Horizon Investments, said, "At some point, the belief that Chinese policymakers will succeed in stimulating economic growth has stopped," adding, "The market's conclusion that meaningful stimulus is unlikely has been confirmed for the third time this year."

The warning from international credit rating agency Fitch that dozens of U.S. banks, including JPMorgan Chase, could face mass downgrades also weighed on market sentiment that day. Fitch analyst Chris Wolfe stated in a CNBC interview released that morning that the operating environment (OE) rating for the U.S. banking sector is deteriorating. He explained, "If the banking sector's OE rating is lowered one notch from the current 'AA-' to 'A+,' all financial criteria will be recalibrated," predicting it would lead to negative rating actions. A comprehensive rating reassessment of more than 70 U.S. banks could take place. This immediately led to a decline in bank stocks. Bank shares lost further momentum after Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, expressed support for more capital regulations.

This week, as the earnings season nears its end, a large number of retail companies, which can confirm U.S. consumer strength, are scheduled to report earnings. Following Home Depot on this day, Target, retail giant TJX (parent company of discount stores TJ Maxx and HomeGoods), will report on the 16th, followed by Walmart and Ross Stores on the 17th. Home Depot, which posted weak results in the first quarter, has already lowered its full-year earnings guidance. In contrast, Walmart raised its sales forecast earlier this year in May, supported by strong grocery and e-commerce businesses.

The Fed, which raised the U.S. benchmark interest rate to 5.25-5.5%, is scheduled to release the FOMC minutes on the 16th. Investors are expected to look for indications of interest rate direction and economic outlook changes after September through these minutes. The market still largely expects a rate hold in September. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of this day, the federal funds futures market reflects an over 88% probability that the Fed will hold rates steady in September. Additionally, this week includes rate decisions from the central banks of New Zealand and Norway. On the 18th, the Korea-U.S.-Japan summit will be held at Camp David in the United States.

In the New York bond market on the day, the benchmark 10-year U.S. Treasury yield traded around 4.21%, and the 2-year yield hovered near 4.95%. The Dollar Index, which measures the value of the dollar against six major currencies, remained steady around 103.2. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," rose more than 11% to 16.4.

International oil prices fell for the second consecutive trading day amid growing concerns over demand slowdown due to weak Chinese economic data. On the New York Mercantile Exchange, September delivery West Texas Intermediate (WTI) crude oil closed at $80.99 per barrel, down $1.52 (1.84%) from the previous day.

This content was produced with the assistance of AI translation services.