Stock market rally stalls as Wall Street banks take hit: Market recap

(Bloomberg) — Stocks struggled to advance amid a selloff at major banks as traders braced for the U.S. presidential debate and key inflation data. Brent crude fell below $70 on concerns about limited demand.

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After rising early in the week, the S&P 500 faltered. JPMorgan Chase & Co. and Goldman Sachs Group Inc. led the decline in shares of major U.S. lenders after their presentations at the 22nd annual Barclays Global Financial Services Conference. Bank investors also closely watched news that U.S. regulators will make sweeping changes to their proposed bank capital rules, halving the expected impact on large lenders and exempting smaller ones from much of the measure. Tesla Inc. climbed on a call from upbeat analysts. Oracle Corp. hit an all-time high on strong results.

Traders will also be assessing election risks ahead of the first debate between former President Donald Trump and Vice President Kamala Harris. That matchup promises more clarity for investors who have already spent months parsing campaign language on tax proposals, tariff projections, government spending plans and policies on energy, electric vehicles, health care and more.

The S&P 500 index was little changed. The Nasdaq 100 gained 0.1%. The Dow Jones Industrial Average fell 0.5%. The KBW Bank index fell 2.6%. The Bloomberg Magnificent Seven index of mega-cap companies climbed 0.7%. The Russell 2000 index of smaller companies fell 0.5%.

The yield on 10-year Treasury notes fell two basis points to 3.69%, ahead of a $58 billion sale of three-year bonds.

If demand for bonds is weak, it could trigger aggressive financial flows while a strong auction result could revive recession concerns, said Tom Essaye of The Sevens Report. Today’s trading is likely to be more dovish as traders await the latest inflation data that has the potential to change expectations for Federal Reserve policy ahead of next week’s meeting.

U.S. stocks are unlikely to fall 20% or more as the risk of recession remains low in the face of expected interest rate cuts from the Fed, according to strategists at Goldman Sachs Group Inc.

The team led by Christian Mueller-Glissmann said that while stocks could decline through the end of the year, hurt by higher valuations, mixed growth prospects and political uncertainty, the chances of an outright bear market are slim as the economy is also partly supported by a healthy private sector.

The story continues

Company Highlights:

Apple Inc. lost its case over a $13 billion ($14.4 billion) Irish tax bill and Google lost its challenge to a $2.4 billion fine for abusing market power, in a double blow to the European Union's crackdown on Big Tech.

JPMorgan Chase & Co. is leading a historic selloff in preferred shares as Wall Street lenders reorganize their balance sheets in anticipation of new rules that are expected to be significantly relaxed.

Southwest Airlines Co. Chairman Gary Kelly is resigning along with six directors in a dramatic move after the carrier faced calls for a strategic overhaul from activist investor Elliott Investment Management.

BMW AG has warned that a recall affecting some 1.5 million vehicles due to defects in its Continental AG braking systems will reduce its profit this year, worsening the industrial crisis in Europe's largest economy.

Volkswagen AG is ending job protections for auto workers in Germany as part of its cost-cutting drive, setting up a showdown with unions as the country's most important industry fights for its future.

Main events of the week:

US CPI, Wednesday

Japan's IPP, Thursday

ECB interest rate decision on Thursday

US Initial Jobless Claims, PPI, Thursday

Eurozone industrial production, Friday

Japanese industrial production, Friday

University of Michigan Consumer Sentiment, Friday

Some of the main movements in the markets:

Actions

The S&P 500 index was little changed at 10:54 a.m. New York time.

The Nasdaq 100 gained 0.1%

The Dow Jones Industrial Average fell 0.5%

The Stoxx Europe 600 fell by 0.6%.

The MSCI World Index fell 0.2%

The KBW banking index fell by 2.6%

The Bloomberg Magnificent 7 Total Return Index rose 0.7%

The Russell 2000 index fell 0.5%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%

The euro fell 0.2% to $1.1018

The pound fell 0.1% to $1.3056

The Japanese yen rose 0.4 percent to 142.65 per dollar.

Cryptocurrencies

Bitcoin fell 0.2% to $56,879.51

Ether fell 0.3% to $2,334.06

Bonds

The yield on 10-year Treasury notes fell three basis points to 3.67%

Germany's 10-year yield fell one basis point to 2.16%

The UK 10-year yield fell two basis points to 3.84%.

Raw materials

This story was produced with assistance from Bloomberg Automation.

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