Turkey Turmoil Rattles Wall Street as Bank Shares Drop

turkey turmoil rattles wall street as bank shares drop
Turkey Turmoil Rattles Wall Street as Bank Shares Drop

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, the most global of the major U.S. banks, fell 2.3 percent. JPMorgan, Wells Fargo and Bank of America 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.

Shares of trade-sensitive companies declined, with Boeing , 3M and Caterpillar down between 2.3 percent and 4 percent.

At 2:25 p.m. ET, the Dow Jones Industrial Average was down 251 points, or 1 percent, at 25,257, the S&P 500 was down 24 points, or 0.8 percent, at 2,829 and the Nasdaq Composite was down 63 points, or 0.8 percent, at 7,829.

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 0.5 percent fall was led by chipmakers. Intel dropped 2.3 percent after Goldman Sachs downgraded the stock to “sell.”

Microchip 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. 

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