Tuesday was a down day on Wall Street with stocks getting walloped across the board. Concerns over China's economy and the possibility that several big U.S. banks could see their credit ratings downgraded weighed on sentiment.
While the selling pressure was widespread for most of the session, healthcare stocks outperformed thanks to a few big movers.
Overnight, data from China showed exports from the world's second-largest economy fell 14.5% year-over-year in July, while imports dropped 12.4%.
"The trade data from China was undoubtedly disappointing as it once again showed sluggish demand both domestically and externally," says Craig Erlam, senior market analyst at OANDA. China's economy is clearly in need of a boost, but it's likely authorities will engage in small, targeted measures that won't boost confidence among investors or households, Erlam adds.
Moody's lowers credit ratings for regional lenders, puts bigger banks under review
Meanwhile, Moody's Investors Services late Monday lowered the credit ratings for several regional lenders, including Pinnacle Financial Partners (PNFP, -2.1%) and M&T Bank (MTB, -1.5%). The ratings agency also said it is reviewing ratings for a number of larger U.S. banks, including Bank of New York Mellon (BK, -1.3%) and State Street (STT, -1.6%). The news sent shockwaves through the financial sector, with Goldman Sachs (GS, -2.1%) and JPMorgan Chase (JPM, -0.6%) being two of the worst Dow Jones stocks today.
"The development, which comes roughly five months after a handful of regional banks hit the skids, has sparked renewed concerns about the potential for additional bank failures and consolidations," says José Torres, senior economist at Interactive Brokers.
Additionally, the headlines hit as investors are trying to determine whether or not the Federal Reserve will continue to raise interest rates. "To that end, the Consumer Price Index (CPI) data to be released this Thursday could be a significant driver of investor sentiment and the outlook for the Fed's monetary policy," Torres adds.
Eli Lilly, Novo Nordisk pop on weight-loss drug news
Investors also took in the latest batch of earnings reports. On the positive side of the ledger, Eli Lilly (LLY) popped 14.9% after the drugmaker reported higher-than-expected second-quarter earnings of $2.11. Plus, revenue of $8.3 billion beat estimates thanks in part to strong sales of Eli Lilly's diabetes drug Mounjaro. LLY also got a boost after Novo Nordisk (NVO, +17.2%) said its obesity drug Wegovy reduced the chance of heart attacks by 20% in subjects who participated in a trial.
The data removes an "overhang" for the obesity treatment landscape, says BofA Securities analyst Geoff Meacham. The analyst, who reiterated his Buy rating on LLY, added that "today's results bolsters our confidence in the obesity commercial opportunity."
At the other end of the spectrum, Beyond Meat (BYND) tumbled 14.3% after the plant-based protein maker reported earnings. While the company reported a narrower-than-expected second-quarter loss of 83 cents per share, revenue of $102.1 million – down 30% on a year-over-year basis – came in below estimates. BYND also gave lower-than-anticipated full-year revenue guidance.
As for the major indexes, while they finished well off their intraday lows, the blue chip Dow Jones Industrial Average still closed down 0.5% to 35,314. The broader S&P 500 shed 0.4% to 4,499, and the tech-heavy Nasdaq Composite fell 0.8% to 13,884.
