Stocks fell lower Tuesday as a new warning hung over the U.S. banking system, reigniting concerns from earlier this year over the health of the financial sector. The Dow Jones Industrial Average dropped 150 points, while the S&P 500 Index and Nasdaq Composite lost 0.40% and 0.80%, respectively.
Here's how the market settled on Tuesday:
S&P 500 Index (NYSE: SPY): -0.42% or -19.11 points to 4,499.33
Dow Jones Industrial Average (NYSE: DIA): -0.45% or -158.38 points to 35,314.75
Nasdaq Composite Index (NASDAQ: QQQ): -0.79% or -110.07 points to 13,884.32
Impacting markets on Tuesday, Moody's downgraded the credit rating of several U.S. regional banks, warning that stresses still persist from the banking crisis sparked in March.
"Many banks' second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital," Moody's analysts Jill Cetina and Ana Arsov wrote in a note Tuesday. "This comes as a mild U.S. recession is on the horizon for early 2024 and asset quality looks set to decline," warning further that the credit rating firm may downgrade some of the nation's largest lenders -- including Bank of New York Mellon (NYSE: BK), US Bancorp (NYSE: USB), State Street (NYSE: STT) and Truist Financial (NYSE: TFC) -- due to the overall financial climate.
The downgrade also comes as the Federal Reserve raised its benchmark interest rate to a range of 5.25% to 5.5%. Market participants are anxiously looking ahead towards the release of another key inflation report for July on Thursday, which will offer more clues for the central bank's further monetary policy for the last half of the year.
Currently, traders are expecting an 86.5% chance the Fed will hold rates at the conclusion of its September meeting, according to the CME FedWatch Tool. Meanwhile, investors are pricing a 71.4% probability policymakers will hold rates at their November meeting.
"Interest rates are likely to remain higher for longer until inflation returns to within the Fed's target range and, as noted earlier, longer-term U.S. interest rates also are moving higher because of multiple factors, which will put further pressure on banks' fixed-rate assets," Moody's said in the research note.
On the earnings front, UPS (NYSE: UPS) shares dipped Tuesday after the delivery giant reported disappointing revenue results for the second quarter. The company also lowered its full year revenue guidance by $4 billion, citing declines in package volumes amid labor negotiations and the cost of a tentative agreement with the Teamsters union.
Eli Lilly (NYSE: LLY) shares popped after the pharmaceutical giant posted better-than-expected second-quarter results, driven by a quarterly profit increase of 85% year-over-year on strong sales from its diabetes drug Mounjaro. The company now expects full-year revenue of between $33.4 billion and $33.9 billion, and adjusted earnings in a range of $9.70 to $9.90 per share.
Palantir Technologies (NYSE: PLTR) shares slipped despite reporting in-line second-quarter earnings and raising it's third-quarter guidance. The data analytics company expects current-quarter revenue between $553 million and $557 million, with its midpoint implying 16% growth.
"We anticipate that we will become eligible for inclusion in the S&P 500 after we report our financial results for Q3 2023 in early November," CEO Alex Karp wrote in a letter to shareholders. "At that point, we will have been profitable on a cumulative basis over the preceding four quarters."
In single-stock news, Amazon (NASDAQ: AMZN) announced it is hosting a second Prime Day sales event in October, continuing the recent trend amongst retail companies in starting the holiday shopping season early. While the e-commerce giant didn't disclose the exact dates of the "Prime Big Deal Days" event, it said it will be hosted in 19 countries. Amazon's 48-hour Prime Day event in July resulted in $12.7 billion in sales, according to Adobe Analytics.
Tilray Brands (NASDAQ: TLRY) shares popped more than 27% Tuesday on news Anheuser-Busch InBev (NYSE: BUD) is selling eight beer and beverage brands to the cannabis company. The transaction includes breweries and brewpubs associated with the brands, as well as employees.
Nvidia (NASDAQ: NVDA) announced a new chip to run artificial intelligence models on Tuesday, called GH200, that pairs its highest-end H100 with 141 gigabytes of memory and a 72-core ARM central processor. The new chip will be available in the second quarter of next year, CEO Jensen Huang said during a conference Tuesday, and if expected to be available for sampling by the end of 2024.
"We're giving this processor a boost," Nvidia CEO Jensen Huang said, adding that the new chip is "designed for the scale-out of the world's data centers."
Looking ahead, market participants will react to earnings reports from companies including Lyft (NASDAQ: LYFT), Rivian (NASDAQ: RIVN), and Twilio (NASDAQ: TWLO) after closing bell.
This article has finished updating.