LIVE MARKETS-Banks among biggest casualties in sell off

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BANKS AMONG BIGGEST CASUALTIES IN SELL OFF

Bank stocks are among the biggest percentage losers on Wall Street on Tuesday as investors try to protect themselves from the economic damage feared from a trade war.

The U.S. faced retaliation after President Trump put 25% tariffs on goods from Mexico and Canada starting Tuesday while he doubled duties on Chinese goods to 20%.

As a result, the S&P 500 financial index .SPSY is sinking more than 3%, and is by far the biggest percentage decliner among the benchmark's 11 major industry sectors.

The narrower S&P 500 banks subsector index .SPXBK is off more than 4.5%, hitting its lowest point since December 30 and on track for its biggest daily percentage loss since March 2023.

The weakest bank stock is Citigroup C.N, down 7.5%, and the biggest decliner in the broader financial sector is investment firm KKR & Co KKR.N, which said it was looking to raise $1.5 billion through an offering of mandatory convertible preferred stocks.

Since banks are highly sensitive to interest rates it likely didn't help that the U.S. 10-year Treasury yield US10YT=RR hit its lowest point since October 21 and is last around 4.17%.

Also, Mark Luschini, chief investment strategist at Janney Montgomery Scott, noted that "banks, and financials in general, have been one of the best performing groups YTD and the only sector outside of the defensives such as Staples, Healthcare, Utilities and REITs to be positive over the last month."

And he said that concerns about slowing economic growth is broadening selling beyond technology and tech-adjacent areas.

"Obviously, financials would not be expected to do well if loan demand weakens," said Luschini.

And Jason Goldberg, Barclays analyst covering the biggest U.S. banks, notes that uncertainty can hurt everything from loan growth to deals.

"Tariffs introduce an element of uncertainty that can affect the largest banks, weighing on loan demand, for example, or reducing expected revenues with capital markets transactions when markets become too volatile," he said.

So investors are trying to figure out just how much the tariffs would hurt economic growth and what it means for the direction of interest rates.

He sees the magnitude of the impact depending on how long the tariff policies stay in place.

(Sinéad Carew, Tatiana Bautzer)

FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:

SHELTER FROM THE TARIFF STORM - CLICK HERE

NASDAQ IN CORRECTION TERRITORY AS TRADE WAR FEARS MOUNT - CLICK HERE

EURO ZONE ECONOMIC WOES WILL PROMPT ECB RATE CUTS, MORGAN STANLEY SAYS - CLICK HERE

BENCHMARK TREASURY YIELD ON A 6-WEEK LOSING STREAK - CLICK HERE

"EITHER WAY, THE EU CONSUMER PAYS" - CLICK HERE

SWISS BULLS CHARGE ON DEFENSIVE PLAYS - CLICK HERE

IS THE EURO STRENGTH A SIGN OF 'ASSERTIVENESS'? - CLICK HERE

VOLATILITY POPS, STOXX DROPS - CLICK HERE

BEFORE THE BELL: TARIFF WOES, DEFENCE POINTS HIGHER - CLICK HERE

NEW TRUMP TARIFFS TAKE EFFECT, EU ALSO IN CROSSHAIRS - CLICK HERE