By Sue Chang and Anora Mahmudova, MarketWatch
Deutsche Bank losses weigh on financials
Wall Street stocks slumped Monday as investors awaited the first
U.S. presidential debate and worries over Germany's Deutsche Bank
weighed on the financial sector.
The S&P 500 index dropped 14 points, or 0.7%, to 2,149 with
financials down 1% to lead the laggards.
The Dow Jones Industrial Average was down 146 points, or 0.8%,
to 18,115. Goldman Sachs Group, Inc.(GS) topped the losers while
Apple Inc.(AAPL) and Chevron Corp.(CVX) were the two gainers among
the 30 blue-chip stocks.
The Nasdaq Composite Index declined 42 points, or 0.8%, to
5,263.
Presidential debate worries: Politics were playing a big role in
rattling investors ahead of Monday's U.S. presidential debate
between Democratic nominee Hillary Clinton and her Republican rival
Donald Trump.
Read:How the Clinton-Trump debate showdown carries potential to
sock stocks
(http://www.marketwatch.com/story/clinton-trump-debate-showdown-carries-potential-to-sock-stocks-2016-09-24)
"There are conflicting poll numbers and some showing that Mr.
Trump is gaining on Hillary Clinton and that is weighing on
markets. However, it's also worries over Deutsche Bank that hit
European bourses and are spilling over to Wall Street," Ryan
Larson, head of equity trading at RBC Global Asset Management.
See:How Deutsche Bank woes are stressing out the U.S. stock
market
(http://www.marketwatch.com/story/how-deutsche-bank-woes-are-stressing-out-the-us-stock-market-2016-09-26)
"The stock market is positioned for a likely Clinton presidency
but as polls show narrowing gap between contenders and as we get
closer to the election day, you will see markets reprice," Larson
said.
Larson said it takes time for markets to fully price in an
outcome of the election.
A national poll conducted by Bloomberg Politics shows Trump with
a two-point lead
(http://www.marketwatch.com/story/on-eve-of-debate-trump-pulls-ahead-in-a-national-poll-2016-09-26)
over Clinton when factoring in third-party candidates.
Erik Nielsen, group chief economist at UniCredit Research, in a
note to clients said he was "amazed" that markets aren't more
unsettled by opinion polls showing the election outcome remains
difficult to guess.
"[Monday], we'll get the first TV debate, and while it'll be too
early to conclude too much from it (remember Obama's dreadful
performance in his first debate with Romney), if the probability of
a Trump victory increases in coming weeks, then you need to start
questioning the Fed's intentions for December, and you'll want to
reduce your exposure to, particularly, U.S. equities and the
dollar," Nielsen said.
The foreign exchange market is also likewise not fully pricing
in the political risks, according to Bank of America Merrill
Lynch.
"As the polls now suggest a much narrower gap between the two
candidates, we feel even stronger about our concerns. We believe
the outcome of the U.S. elections will be the main determinant of
how the rest of the year and next year will evolve in markets,
while short-term and long-term implications can be very different,"
Athanasios Vamvakidis, currency analyst at Bank America Merrill
Lynch, said in a report.
Clinton and Trump will face off for the first of three debates
at 9 p.m. Eastern at Hofstra University in Hempstead, N.Y., in what
Goldman Sachs has billed as the "biggest match-up since the
Mayweather/Pacquiao bout
(http://www.marketwatch.com/story/wall-street-starts-to-raise-alarm-bells-over-the-possibility-of-a-trump-presidency-2016-09-26)"--a
much-hyped 2015 boxing match.
Heavy losses for Deutsche Bank took a toll on European markets
and pressured U.S. financial shares. U.S.-listed shares of Deutsche
Bank(DBK.XE) (DBK.XE) fell 5.7%, after Germany's Focus Magazine
reported over the weekend that Chancellor Angela Merkel wouldn't
support state aid for the bank. The bank denied it had asked for
any support, according to a report from Dow Jones Newswires, and
the government also dismissed the report.
Crude-oil futures recovered
(http://www.marketwatch.com/story/oil-prices-attempt-a-rebound-as-hopes-rise-for-production-deal-2016-09-26)
on renewed hopes that the Organization of the Petroleum of
Exporting Countries and other major oil producers, including
Russia, might make progress on a deal to limit production. The
producers will meet on the sidelines of an energy conference in
Algeria Wednesday.
U.S. crude futures rose more than 3%.
Economic docket:Sales of newly-constructed homes slipped less
than expected in August
(http://www.marketwatch.com/story/new-home-sales-stay-stronger-than-expected-as-demand-buoys-a-firmer-pace-of-building-2016-09-26),
pointing to some stabilization in a normally choppy market as
demand remained strong. Stocks maintained losses after the data
release.
On the policy front, Federal Reserve Gov. Daniel Tarullo will
give a speech on the "next steps in the evolution of stress
testing" at Yale School of Management Leaders Forum in New Haven,
Conn., at 11:45 a.m. Eastern. A short while later, Dallas Fed
President Rob Kaplan will appear in a moderated question and answer
session at 1:30 p.m. Eastern.
Stocks to watch: The market appears to have second thoughts
about CBOE Holdings Inc.'s (CBOE) plan to acquire Bats Global
Markets Inc. (BATS) in a deal valued at $3.2 billion. BATS shares
surged nearly 20% on Friday when the news of takeover surfaced, but
are 3.7% lower Monday. CBOE shares slumped 4%.
Shares of Chemtura Corp. (CHMT) soared 16% after German
specialty chemical company Lanxess AG (LXS.XE) (LXS.XE) said it
plans to buy the Philadelphia-based rival
(http://www.marketwatch.com/story/lanxess-to-buy-chemtura-in-27-billion-chemical-company-merger-2016-09-25)
in a deal with an enterprise value of around $2.7 billion.
Twitter Inc. shares (TWTR) were off 3%, giving up some of the
huge gains after last week's report that the online social media
provider was talking with a number of potential suitors
(http://www.marketwatch.com/story/why-a-salesforce-deal-to-go-after-twitter-makes-no-sense-2016-09-24),
including Salesforce.com Inc. (CRM).
(CRM)Pfizer Inc. (PFE) slipped 1.6% after the pharmaceutical
group said it would not split into two separate, publicly traded
entities
(http://www.marketwatch.com/story/pfizer-decides-against-splitting-into-two-companies-2016-09-26).
Shares of Smith & Wesson Holding Corp. (SWHC) slumped more
than 7% after the gun maker disclosed in a filing that its bid to
make replacements for the U.S. Army's standard M9 sidearm was
denied
(http://www.marketwatch.com/story/smith-wessons-stock-slumps-after-missing-out-on-us-army-deal-2016-09-26).
(CRM)Other markets: Deutsche Bank's losses were driving the
Stoxx Europe 600 index
(http://www.marketwatch.com/story/european-stocks-face-worst-day-in-almost-3-months-as-oil-deutsche-bank-shares-slump-2016-09-26)
to its worst day in nearly three months, with the index sharply
lower.
The Nikkei 225 index
(http://www.marketwatch.com/story/asian-markets-drop-on-global-oil-worries-2016-09-25)
fell 1.3% as the Japanese yen pushed higher against the U.S.
dollar. The dollar
(http://www.marketwatch.com/story/dollar-gives-back-some-against-the-yen-2016-09-26)
last traded at Yen100.35, against Yen101.035 seen late Friday in
New York.
Bank of Japan Gov. Haruhiko Kuroda on Monday said there is "no
limit to monetary policy"
(http://www.marketwatch.com/story/bojs-kuroda-ready-to-cut-rates-deeper-into-negative-territory-2016-09-26)
in his first speech since last week's decision by the Japanese
central bank to overhaul its stimulus program. He said the BOJ
would use "every possible policy tool" to get to its 2% inflation
goal, according to media reports.
See: Bank of Japan's big move isn't dispelling fears that
central banks are out of ammo
(http://www.marketwatch.com/story/bank-of-japans-big-move-isnt-dispelling-market-fears-that-central-banks-are-out-of-ammo-2016-09-24)
Gold futures
(http://www.marketwatch.com/story/gold-eases-from-multimonth-high-as-focus-turns-to-us-presidential-debate-2016-09-26)
rebounded to trade up 0.2%, while the dollar, as gauged by the ICE
U.S. Dollar Index , slipped 0.3%.
--Barbara Kollmeyer contributed to this report.
(END) Dow Jones Newswires
September 26, 2016 12:58 ET (16:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.