Wall Street flat as Citi results weigh on bank shares. Wall Street’s three main indexes eased from their record highs on Monday as bank stocks turned lower after the third largest U.S. lender, Citigroup, reported a squeeze in interest margins.
Shares of the Wall Street bank fell 1.3%, reversing early gains from a quarterly profit beat, and weighed on other big lenders.
“As Citi’s net interest margin compressed by 5 basis points sequentially this quarter, investors are anxious this will lead to lower earnings and profitability for the large-cap U.S. banks,” Marty Mosby, director of bank and equity strategies at Vining Sparks, said.
“Bank investors are most worried about the upcoming expected decline in short-term interest rates when the Federal Reserve begins to cut its Fed Funds rate.”
JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo will report earnings on Tuesday. The banking index was down 0.95%, leading to a 0.54% decline in the S&P 500 financial index.
Profit from the S&P 500 companies is expected to dip 0.3% year-over-year, the first quarterly decline in three years, according to Refinitiv IBES data.
Last week, gains in stocks were powered by comments from Fed Chairman Jerome Powell that reassured investors that an interest rate cut was highly likely at the central bank’s policy meeting later this month.
At 10:08 a.m. ET the Dow Jones Industrial Average was down 4.17 points, or 0.02%, at 27,327.86, the S&P 500 was down 1.59 points, or 0.05%, at 3,012.18 and the Nasdaq Composite was down 1.91 points, or 0.02%, at 8,242.23.
Also weighing heavily on the S&P 500 and the Dow Industrials were shares of Boeing Co, which fell 1.4% on a report that its 737 Max jet may stay grounded until early 2020.
Top loser on the benchmark index was Symantec Corp, which tumbled 13.1% after a report that the cybersecurity company and chipmaker Broadcom Inc have ceased deal talks. Broadcom rose 2.2%.
General Electric Co fell 1.1% after brokerage UBS downgraded shares of the industrial conglomerate to “neutral” from “buy”, according to traders.
Paper packaging companies Westrock Co, Packaging Corp of America and International Paper Co, shed between 2% and 3.5% after KeyBanc downgraded their shares, citing risks from a further fall in containerboard and pulp prices.
The S&P index recorded 53 new 52-week highs and one new low, while the Nasdaq recorded 49 new highs and 26 new lows.