Moody’s Downgrades U.S. Banks’ Credit Ratings, Sparks Sell-Off in U.S. Stocks
Hangzhou Net – On August 8, Moody’s Investors Service, the international rating agency, announced a downgrade in the credit ratings of several U.S. banks, resulting in a sell-off in the U.S. stock market. This move has raised concerns about the tightening of credit and the resilience of the U.S. banking system.
Moody’s lowered the credit ratings of 10 small and medium-sized banks, including U.S. Manufacturers and Traders Bank and Webster Financial Corporation, by one level. Additionally, the credit ratings of six large banks, such as U.S. Bank, Bank of New York Mellon, and State Street, were also downgraded. Furthermore, 11 large U.S. banks, including Capital One Bank, Citizens Financial Group, and Fifth Third Bank, had their outlook ratings downgraded to negative.
“The Wall Street Journal” reports that this downgrade by Moody’s has sparked concerns about the U.S. banking system’s ability to withstand pressure and the tightening of credit. As a result, there was a sell-off in the financial stocks when the U.S. stock market opened, and all three major stock indexes experienced a decline.
At the close of trading on August 8, the Dow Jones Industrial Average fell 0.45% or 158.64 points, settling at 35,314.49 points. The Nasdaq Composite Index dropped 0.79% or 110.07 points and ended at 13,884.32 points. The S&P 500 stock index fell by 0.42% or 19.06 points, closing at 4,499.38 points.
Bloomberg suggests that this downgrade sends a short-term bearish signal for U.S. stocks, and there is still potential for further correction in the coming trading days. CNBC quoted banking analysts, stating that while some investors were surprised by Moody’s announcement, they were already aware of the challenges faced by small and medium-sized banks in the United States. Particularly, smaller regional banks are struggling. Investors in bank stocks are advised to thoroughly analyze the current situation of different banks before making any further plans.
Since March of last year, the U.S. Federal Reserve has raised interest rates a total of 11 times. Banks of all sizes are finding it difficult to cope with rising deposit costs and increased risks of non-performing assets. In fact, the United States has witnessed five bank bankruptcy cases since March of this year, with notable banks such as Silicon Valley Bank, Signature Bank, and First Republic Bank being affected.
The downgrade by Moody’s raises concerns about the stability of the U.S. banking sector and its ability to navigate the challenging economic landscape. Investors will be closely monitoring the response of U.S. banks and their plans to mitigate risks in order to restore market confidence.