Wall St set for lower open as Moody's downgrades stoke banking concerns
By Bansari Mayur Kamdar and Johann M Cherian
(Reuters) -Wall Street was set to open lower on Tuesday with financial stocks dropping after Moody's (NYSE:MCO) overnight cut credit ratings of several small- to mid-sized U.S. banks and said it could downgrade some of the country's biggest lenders.
Moody's cut the ratings of 10 lenders by one notch and placed six banking giants, including Bank of New York Mellon (NYSE:BK), US Bancorp (NYSE:USB), State Street (NYSE:STT) and Truist Financial (NYSE:TFC), on review for potential downgrades.
The ratings agency also warned that the sector's credit strength would likely be tested by funding risks and weaker profitability.
Big banks Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) eased 1.1% and 1.7%, respectively, in premarket trading, while Bank of New York Mellon and U.S. Bancorp shed 2.9% and 3.6%.
«Moody's putting some banks on warning adds to Fitch's downgrade of the U.S. Treasury market last week and gives investors additional reason to be cautious,» said Sam Stovall, chief investment strategist at CFRA Research.
«It also means that the concern that we had in March over those three bank defaults, is not over yet.»
The banking index has lost 1.4% so far this year, compared with a 17.7% rise in the benchmark S&P 500 index, after the collapse of Silicon Valley Bank and Signature Bank (OTC:SBNY) earlier this year sparked a crisis of confidence in U.S. lenders and led to a run on deposits at several regional banks.
«Orderly position trimming has reduced some of the short-term positioning risk that has been a worry for investors in recent weeks,» said Citi strategist Chris Montagu in a note.
«This puts markets in a good set-up to make new gains or weather negative news/shocks
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