By Geoffrey Smith
Investing.com --U.S. stocks opened lower on Tuesday as the country’s biggest banks took a massive hit in their second-quarter earnings from the coronavirus pandemic.
JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) reported provisions against actual or possible credit losses of just under $28 billion in the quarter, reflecting the huge wave of corporate and personal insolvencies that followed the imposition of lockdowns across the country in the spring.
JPMorgan and Citigroup stock fell 0.5% and 2.2% respectively, although the losses were cushioned by the fact that their markets divisions – notably their bond traders – reaped windfall profits from a flight to safe assets by clients in April and May. Wells Fargo stock, by contrast, fell 7.5% owing to the lack of any such counterweight.
By 9:35 AM ET (1335 GMT), the Dow Jones Industrial Average was down 50 points, or 0.2% at 26,035 points. The S&P 500 was down 0.3% and the Nasdaq Composite was down less than 0.1%.
Delta Air Lines (NYSE:DAL) stock also fell 2.9% after the company warned that it will take more than two years to see a sustainable recovery in air travel.
The results of the first three big banks to report also pulled other financial stocks lower: Morgan Stanley (NYSE:MS) stock lost 1.7% while Bank of America (NYSE:BAC) stock fell 1.6%.
Christopher Smart, chief strategist at the Barings Investment Institute, said in e-mailed comments that, even though the market may avoid another rout, it can't carry on defying gravity forever.
"The logic is that good news is good news and bad news is good news," Smart said with a nod to how investors jump on any sign of an economic rebound, but interpret bad news as a herald of still more fiscal and monetary stimulus. "The 'pandemic put' won't last forever."
Elsewhere, Spotify (NYSE:SPOT) stock fell 4% after UBS cut the streaming compay's rating, saying the market was now overestimating its ability to contain costs and monetize its content. UBS also cut Netflix (NASDAQ:NFLX) stock to hold from buy. It fell 3.0%.
U.S. crude oil futures also fell Tuesday on what was interpreted by another sign of potential weakness in U.S. demand in the near term. Both stocks and oil had already fallen sharply in late trading on Monday after California reversed much of its economic reopening in an attempt to stem the surge of coronavirus infections, but oil had stabilized overnight on the back of data showing record buying by Chinese importers in June.