Turkey turmoil rattles Wall St., banks take a knock

August 10, 2018

By Amy Caren Daniel

(Reuters) – U.S stocks fell on Friday as a deepening crisis in Turkey dragged on bank stocks and triggered fears that it could spread to other global economies.

At the heart of the crisis was a slump in the Turkish lira, which worsened after President Donald Trump doubled tariffs on steel and aluminum imported from the country.

“The currency crisis is actually a banking crisis as Turkey owes so much money to so many different banks, that they risk a potential contagion,” said David McKnight, adviser at David McKnight & Co in Puerto Rico.

“As long as Trump is going to be willy-nilly with tariffs, there’s going to be a lot of uncertainty and markets thrive on certainty.”

Citigroup <C.N>, the most global of the major U.S. banks, fell 2.3 percent. JPMorgan <JPM.N>, Wells Fargo <WFC.N> and Bank of America <BAC.N> were all down about 1 percent.

Investors fled to safe-haven assets, pushing the dollar to a 13-month high and weighing on U.S. bond yields that slipped to a three-week low. [US/]

Shares of trade-sensitive companies declined, with Boeing <BA.N>, 3M <MMM.N> and Caterpillar <CAT.N> down between 2.3 percent and 4 percent.

At 12:41 p.m. ET, the Dow Jones Industrial Average <.DJI> was down 175.04 points, or 0.69 percent, at 25,334.19, the S&P 500 <.SPX> was down 14.98 points, or 0.52 percent, at 2,838.60 and the Nasdaq Composite <.IXIC> was down 27.87 points, or 0.35 percent, at 7,863.91.

All the 11 major S&P sectors were trading in the red.

“Today’s impact has set the markets in a temporary risk-off sentiment,” said Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors.

S&P technology sector’s <.SPLRCT> 0.5 percent fall was led by chipmakers. Intel <INTC.O> dropped 2.3 percent after Goldman Sachs downgraded the stock to “sell”.

Microchip <MCHP.O> shares fell 9.9 percent, among the biggest decliners on the S&P, after disappointing second-quarter revenue forecast.

Data on Friday showed U.S. consumer prices rose in July and the underlying trend continued to strengthen, pointing to a steady increase in inflation pressures.

Declining issues outnumbered advancers for a 1.63-to-1 ratio on the NYSE and for a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and 10 new lows, while the Nasdaq recorded 73 new highs and 78 new lows.

(Reporting by Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva)

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