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15.08.2023 02:47 PM
US banking system faces new challenge

While investors speculate on the Federal Reserve's actions in September this year, analysts at Fitch Ratings have issued a warning about a new threat to the US banking system. The risk of sharp downgrades to the ratings of dozens of American banks, including major ones like JPMorgan Chase, has come under the spotlight.

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Following a series of studies, the rating agency downgraded its assessment of the industry in June. The move went largely unnoticed, as it did not result in any actual downgrades of banks. However, experts are genuinely concerned about the potential for more serious problems ahead, with a significant probability of a one-notch downgrade to A+ from AA- looming.

Market rumors are swirling that Fitch might soon have to reassess the ratings of over 70 American banks. It's worth reminding that credit rating agencies, on which many bond investors rely, have recently caused market turbulence with their moves. Last week, Moody's lowered ratings for 10 small and medium-sized regional banks and warned that more cuts could affect another 17 creditors, including larger institutions like Truist and Bank of America.

Earlier this month, Fitch downgraded the long-term credit rating of the US due to political turmoil and rising debt, a move criticized by business leaders including JPMorgan CEO Jamie Dimon and US Treasury Secretary Janet Yellen.

Premarket

Shares of biotech company Turnstone fell by 2.3% in premarket trading after investment firm Piper Sandler initiated coverage with an "above-market" rating on Tuesday.

DR Horton, a construction company, saw its stocks rise by 2.2% in premarket trading following news that Warren Buffett's Berkshire Hathaway increased its stake in DR Horton by over $700 million.

Hannon Armstrong Sustainable Infrastructure Capital's shares grew by 2.1% after Bank of America upgraded them to a "buy" rating, citing potential benefits from the new Inflation Reduction Act.

Nvidia's shares gained 1.5% ahead of the bell. UBS, Wells Fargo, and Baird raised their outlooks, expecting the company's stocks to trade positively next year.

After an 8.6% drop last week, shares surged by 7.1% on Monday, recovering lost ground.

Cleveland-Cliffs, a producer of steel products, fell over 1% in pre-market trading but rebounded by 8.8% later. The sharp increase followed the rejection of a $7.3 billion offer to acquire US Steel.

As for the technical outlook on the S&P 500, the demand for the index has not returned, and trading continues within a sideways range. Bulls may continue the uptrend, but they need to settle the price above $4,488 and $4,515. A breakthrough could lead to a surge to $4,539. Bulls also should maintain control above $4,557, reinforcing the bullish market. In case of a downward move due to decreased risk appetite, bulls will have to protect $4,469. Breaking through this level, the trading instrument may return to $4,447 and $4,427.

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