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Bank Stocks Take Down Major U.S. Indexes

By:
James Hyerczyk
Updated: Mar 22, 2017, 03:08 UTC

The major U.S. stock indexes tumbled on Tuesday, posting their worst loss of the year. Bank stocks led the way, losing value due to pressure from falling

Stocks Daily News

The major U.S. stock indexes tumbled on Tuesday, posting their worst loss of the year. Bank stocks led the way, losing value due to pressure from falling U.S. Treasury yields. Investors also zeroed in on healthcare stocks which are facing a mountain of uncertainty due to worries over the nation’s healthcare plan

On Tuesday, the blue chip Dow Jones Industrial Average fell 237.85 points. The bench mark S&P 500 Index dropped 29.45 points and the tech-based NASDAQ Composite ended the session 108.67 points lower.

Daily June E-mini S&P 500 Index

One problem is the 10-year Treasury yield. It has been losing ground since the release of the Fed’s monetary policy announcement last Wednesday. Although the Fed raised its benchmark interest rate 25-basis points, it signaled that it would “gradually” raise rates in 2017 instead of four rate hikes that were starting to be priced in by investors.

Bank stocks rose on speculation that higher rates would lead to higher profits. Once the Fed stood its ground and kept on the path it outlined in December 2016, investors realized that bank stocks were overpriced and began aggressively taking profits. This began to drag down the stock indexes heavily weighted in the financial sector.

XLF Financial Select Sector SPDR Fund
Daily XLF Financial Select Sector SPDR Fund

A drop in retail stocks also contributed to the overall weakness in the markets. The catalyst behind this weakness was comments from Rep. Kevin Brady, the Republicans’ chief tax writer in the House. He told a television audience that a border adjustment tax will probably appear in the final tax reform plan.

Investors were also looking ahead to Thursday’s vote on repealing and replacing the Affordable Care Action. This vote is expected to cause volatility in the markets. On Tuesday, The Freedom Caucus, a key group of House Republicans, threatened to issue a formal statement of opposition to the Obamacare replacement bill, which would delay the vote, unless the language in the bill changes dramatically.

This could be a problem because if the government can’t get past health care reform, President Trump’s tax reform plan will likely be delayed and the market isn’t ready for this development.

Asian Markets

Asian stock markets were down early Wednesday, after reports that the South Korean defense ministry is trying to confirm reports of a North Korean missile launch. The Japanese Nikkei was down more than 2% on unconfirmed North Korea missile test reports.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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