Benchmarks yet again ended in the red on Monday, dragged down by declines in financial shares. Investors sold financial shares on Deutsche bank woes, with the bank’s shares down more than 50% so far this year. Investors remained worried about its capital position ahead of an expected legal settlement with the U.S. Justice Department. Meantime, market watchers kept a close eye on the first debate between the U.S. presidential candidates Hillary Clinton and Donald Trump.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) declined 0.9% or 166.62 points to close at 18,094.83. The S&P 500 fell almost 0.9% to close at 2,146.10. The tech-laden Nasdaq Composite Index closed at 5,257.49, decreasing 0.9%. The fear-gauge CBOE Volatility Index (VIX) surged almost 18% to settle at 14.50. A total of around 5.9 billion shares were traded on Monday, less than the last 20-session average of 6.8 billion. Decliners outpaced advancing stocks on the NYSE. For 70% stocks that declined, 27% advanced.
Deutsche Bank Losses Weigh on Financials
Germany’s Deutsche Bank AG (DB - Analyst Report) weighed on the financial sector. Shares of Deutsche Bank tanked 7.1% on Monday after Chancellor Angela Merkel said that she wouldn’t offer state aid to the giant lender. Deutsche Bank faces a $14 billion fine from the U.S. Justice Department. The bank needs to settle civil claims, which is related to sale of structured mortgage bonds during the 2008-2009 financial crisis.
Merkel was in no mood to offer assistance as she was heading into an election year. The bank has always been a problem child for Germany. The International Monetary Fund, back in June, had already described Deutsche Bank as the greatest threat to the global financial system (read more: Deutsche Bank Down Over 7%, Stock Hits New Low).
The Financial Services Select Sector SPDR (XLFS) decreased 1.6%, the biggest loser among the S&P 500 sectors. Dow components Goldman Sachs Group, Inc. (GS - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) both dropped 2.2%. While Goldman Sachs has a Zacks Rank #3, JPMorgan Chase has a Zacks Rank #4. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Politics also played a major role in making investors edgy on Monday. Ahead of the much awaited U.S. presidential debate, a national poll conducted by Bloomberg Politics had showed Trump with a two-point lead over Clinton. In contrast, Clinton held a six-point lead over Trump heading into the debate, according to an NBC News/Wall Street Journal poll.
The Presidential candidates’ debate at Hofstra University in Hempstead, N.Y. has been described by Goldman Sachs as the “biggest matchup since the Mayweather/Pacquiao bout”, a much hyped boxing match last year (read more: Stocks & ETFs Likely to Soar on First Presidential Debate).
New Home Sales Fell Less-Than-Expected
In economic news, sales of newly-constructed homes dropped 7.6% in August to a seasonally adjusted annual rate of 609,000, according to the U.S. Department of Commerce. However, it did beat the consensus estimate of 598,000.
In fact, sales were up 20.6% from year ago levels. July’s sales were also revised up 5,000 units to 659,000, the highest level since Oct 2007.
Stocks that Made Headlines
Will Disney's Acquisition of Twitter Suit its Portfolio?
The Walt Disney Company (DIS - Analyst Report) has emerged as one of the contenders to acquire popular microblogging site Twitter, Inc. (TWTR - Analyst Report) . (Read More)
ConAgra Obtains Grocery Brands from Frontera & Red Fork
ConAgra Foods, Inc. (CAG - Analyst Report) recently enriched its product portfolio by acquiring the Salpica, Red Fork and Frontera brands from Red Fork LLC and Frontera Foods, Inc. (Read More)
Motorola Solutions to Acquire Spillman Technologies
In a bid to expand its software portfolio, Schaumburg, IL-based Motorola Solutions Inc. (MSI - Analyst Report) recently announced its intention to acquire Spillman Technologies. (Read More)
Sunoco Logistics to Acquire Permian Basin Assets for $760M
Sunoco Logistics Partners L.P. (SXL - Analyst Report) has recently entered into an agreement with Switzerland-based energy trading giant, Vitol Inc., to purchase Permian Basin crude oil unit from the latter. (Read More)
Rice Energy Set to Acquire Vantage Energy for $2.7B
Rice Energy Inc. (RICE - Snapshot Report) recently announced its decision to acquire Vantage Energy for roughly $2.7 billion. (Read More)
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