Key facts
- The S&P 500 Financial index closed down 2% on Tuesday.
- Charles Schwab shares fell 6.1%, Ameriprise Financial shares fell 4.4%, and Raymond James shares lost more than 3%.
- The S&P 500 bank index closed down 3% on Tuesday.
- The gap between two- and 10-year Treasury yields, a closely watched part of the yield curve, hit its flattest level since March 2025 earlier on Tuesday.
- SB Energy, a subsidiary of SoftBank, postponed its planned US IPO roadshow.
- Nuclear services company Holtec suspended its planned US IPO last week.
The S&P 500 Financial index and the benchmark's bank sector faced pressure on Tuesday, driven by investor concerns about artificial intelligence's potential to disrupt traditional businesses and uncertainty surrounding AI-related initial public offerings. Money managers Charles Schwab, Ameriprise Financial, and Raymond James were among the notable decliners, with Schwab falling 6.1%, Ameriprise down 4.4%, and Raymond James losing over 3%. The broader financial index closed down 2%, and the S&P 500 bank index finished 3% lower.
Macrae Sykes, portfolio manager at Gabelli Funds, noted that the increasing capabilities of AI tools, such as Meta Platforms' AI agent Muse, are raising concerns about competition within the wealth management industry. He described the market's reaction as a "sell-without-regard reaction" to potential AI disruption.
Additionally, movements in the US bond market, specifically the flattening of the yield curve between short- and long-dated Treasury notes, contributed to the negative sentiment. A closely watched segment of the yield curve, measuring the gap between two- and 10-year Treasury yields, reached its flattest level since March 2025 earlier on Tuesday, last trading at 21 basis points. This flattening, which has been gradual since August 18, can potentially impact bank profitability. Rick Meckler, partner at Cherry Lane Investments, commented that there is a "tipping point" where rate hikes, intended to reflect a strong economy, could instead slow it down.
Concerns about the IPO market also played a role, following a report on delays for companies tied to AI data centers. SB Energy, a subsidiary of SoftBank, recently postponed the marketing of its planned US IPO, and nuclear services company Holtec suspended its own planned IPO last week.
Despite these short-term concerns, Sykes maintained a positive long-term outlook for bank stocks, citing a strong economy, good employment, and sound fundamentals.