The News Herald (Willoughby, OH)
U.S. stocks slide further as banks, energy companies sink
NEW YORK » U.S. stock indexes edged lower for the second day in a row Wednesday as a sharp drop for banks and a rare loss for technology companies canceled out gains for drugmakers and consumer-focused companies.
Banks fell hard as executives from JPMorgan Chase and Bank of America said their trading businesses are having a rough second quarter. An eight-day winning streak for technology companies ended. Energy companies fell with oil prices. Investors picked consumer-focused companies, drugmakers, and high-dividend utilities and household goods companies. The New York Stock Exchange was evenly split between gainers and losers.
“The stock market has been strong and all the while bond yields have dropped during the year,” signaling caution about the economy, said Brent Schutte, chief investment strategist for Northwestern Mutual Management. “In the next couple of months we’re going to solve which is right: the bond market or the stock market.”
The Standard & Poor’s 500 index lost 1.11 points, or less than 0.1 percent, to 2,411.80. The Dow Jones industrial average dropped 20.82 points, or 0.1 percent, to 21,008.65. The Nasdaq composite fell 4.67 points, or 0.1 percent, to 6,198.52. The Russell 2000 index of small-company stocks slipped 0.99 points, or 0.1 percent, to 1,370.21.
Banks skidded a day earlier as bond yields dropped, which hurts banks by forcing interest rates on loans lower. Yields were little changed Wednesday, but financial firms fell again as investors worried that banks’ revenue from trading stocks, bonds and currencies is going to weaken in the second quarter.
At a financial industry conference in New York, Marianne Lake, JPMorgan Chase’s chief financial officer, said JPMorgan’s trading revenue is down about 15 percent this quarter because of a drop in fixed-income trading. She said that was because of low interest rates and remarkably low market volatility.
“There is not a lot to trade around,” she said. “People have cash but no conviction.”
At a different industry event Wednesday, Bank of America CEO Brian Moynihan said second-quarter trading revenue will fall 10 percent compared to a year ago.
The banking industry had an outstanding first quarter, and trading was a key reason. JPMorgan Chase fell $1.75, or 2.1 percent, to $82.15 and Bank of America lost 43 cents, or 1.9 percent, to $22.41. Capital One slumped $1.36, or 1.7 percent, to $76.92 and Goldman Sachs, which saw its vaunted trading business hit a speed bump in the first quarter, gave up $7.16, or 3.3 percent, to $211.26.
Bond prices were little changed. The yield on the 10year Treasury note remained at 2.21 percent.