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US stocks skidded on Tuesday with bank shares at risk of logging their worst day since last year’s Brexit vote amid mounting worries over government policy initiatives and expanding valuations.
The S&P 500 index was down 1 per cent at midday at 2,350, while the Dow fell 0.9 per cent to 20,716.3 and the Nasdaq Composite sold off 1.4 per cent to 5,820.9.
Financial stocks faced the heaviest selling, with the sector down 2.5 per cent. Bank shares tumbled 3.6 per cent, putting them on track for the sharpest decline since June 27, FactSet data show.
Other economically sensitive sectors were also in the red. Materials and industrials fell 1.3 per cent each, while tech and consumer discretionary stocks were down roughly 1 per cent.
Financials were pressured both by worries that a heated debate on Capitol Hill over healthcare legislation will delay business-friendly initiatives and by a flattening yield curve, said Ian Winer, head of equities at Wedbush.
Goldman Sachs equities analysts noted that if the House of Representatives was unsuccessful in passing healthcare legislation on Thursday, “stocks may start to reflect impatience about the timing of policy delivery, having made a ‘down payment’ already in multiples”. The legislation would still need to pass the Senate, seen as a bigger hurdle.
Looking at fundamentals, a record proportion of investors are now concerned that stocks globally are overvalued, with the US seen as the most expensive, according to a Bank of America Merrill Lynch survey released on Tuesday. Indeed, earlier this month, the S&P 500′s forward 12-month price-to-earnings ratio hit its highest level since 2004.