Benchmarks ended in the red on Thursday, dragged down by declines in financial shares. Financial shares, already tainted by the recent disruptions at Deutsche Bank and Wells Fargo, settled lower ahead of their quarterly earnings results. The lack of indications from the Fed about the possibility of a rate hike didn’t bode well for such stocks either. Investors also grew jittery over a decline in China’s exports. Global demand for goods from the world’s second-largest economy remained sluggish.
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) decreased 0.3%, to close at 18,098.94. The S&P 500 also declined 0.3% to close at 2,132.55. The tech-laden Nasdaq Composite Index closed at 5,213.33, losing 0.5%. The fear-gauge CBOE Volatility Index (VIX) went down 1.8% to settle at 15.63. A total of around 6.7 billion shares were traded on Thursday, lower than the last 20-session average of 6.8 billion shares. Decliners outpaced advancing stocks on the NYSE. For 65% stocks that declined, 33% advanced.
Financial Stocks Tank
Concerns about Deutsche Bank AG (DB - Free Report) ’s liquidity adversely affected financial shares, while Wells Fargo & Co (WFC - Free Report) added to the atmosphere of mistrust. Deutsche Bank has endured questions about whether it will be able to withstand the cost of any settlement with the U.S. Department of Justice. The bank needs to settle civil claims, which is related to the sale of structured mortgage bonds during the 2008-2009 financial crisis. The German lender has plunged more than 40% this year as investors remain worried about the institution’s thin capital cushion.
Wells Fargo, on the other hand, was accused of creating fake accounts that led to its CEO John Stumpf’s resignation. The bank was accused of cross-selling, in which it created around 2 million unauthorized customer accounts to achieve its sales goals (read more: Is Wells Fargo Scam an Indication of Major Banking Chaos?).
Massachusetts’ finance regulator has also charged Morgan Stanley (MS - Free Report) over “dishonest and unethical” business practices that put pressure on brokers to sell loans to their clients. (read more: Morgan Stanley Charged for "Unethical" Business Practices).
Meantime, Fed policy makers were divided over the timing of a rate hike, which also had a negative impact on financial shares. Financial shares took a beating ahead of their quarterly earnings release starting from today.
The Financial Services Select Sector SPDR (XLFS) declined 1.1%, the highest among the S&P 500 sectors. In fact, the financial sector has seen three straight quarters of withdrawals, the longest stretch since the Bull Run began. Dow components from the sector including Goldman Sachs Group, Inc. (GS - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) fell 1.1% and 0.6%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Weak Chinese Trade Data
Investors were also nervous over weak Chinese trade data. For the month of September, China’s exports plummeted 10% from a year earlier, according to the General Administration of Customs.
China’s shipments abroad have softened for the sixth-straight month in September. Such decline in exports, an important indicator of its economic strength, is expected to weigh on its economic growth. Separately, China’s imports also declined 1.9% last month from year ago period.
Stocks That Made Headlines
Unilever Q3 Sales Dip on Currency Woes; Stock Down
Unilever N.V. (UN - Free Report) posted weak third-quarter 2016 results mainly due to currency headwinds and weak economic conditions in a number of countries. (Read More)
Kellogg to Buy Brazilian Food Maker, Buyback Trimmed
Kellogg Company (K - Free Report) recently signed an agreement to buy a Latin American snacks manufacturer. (Read More)
Welltower Closes $1.15B Seniors Housing Portfolio Buyout
Welltower Inc. (HCN - Free Report) has completed the acquisition of Vintage Senior Living portfolio for $1.15 billion. (Read More)
EQT Corp Drops Down Assets Worth $275M to its Partnership
EQT Corporation (EQT) recently announced that it has divested the Allegheny Valley Connector (“AVC”) transmission and storage system as well as several Marcellus gathering systems to EQT Midstream Partners. (Read More)
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked ""all-star"" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>