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Stocks are slumping Tuesday as more caution creeps into financial markets worldwide.

The S&P 500 was 1% lower in early trading, following up on losses for stocks across Europe and much of Asia.

The Dow Jones Industrial Average was down 370 points, or 1%, at 35,102, as of 9:50 a.m. Eastern time, and the Nasdaq composite was 1.3% lower.

In the U.S., bank stocks dropped after Moodys cut the credit ratings for several smaller and midsized ones amid a long list of concerns about their financial strength.

Across the Pacific, stocks sank 1.8% in Hong Kong and 0.3% in Shanghai after a report showed exports for Chinas troubled economy shrank by the most since the start of the pandemic in 2020.

The worries layered on top of a mixed set of earnings reports from big U.S. companies.

UPS fell 3% after it cut its forecast for revenue this year. It reported stronger profit for the spring but weaker revenue.

Eli Lilly helped to limit the markets losses after jumping 16.4%.

The medicine developer reported profit and revenue for the spring that both topped analysts expectations.

More jolts may be ahead for markets.

The U.S. government later in the morning will report how many job opening were available across the country in June, a test of how resilient the job market remains.

Economists expect a separate report to show U.S. manufacturing continues to struggle under the weight of much higher interest rates.

The Federal Reserve has hiked its main interest rate to the highest level in more than two decades in hopes of grinding down inflation.

High rates work by slowing the entire economy bluntly, which has raised the risk of a recession but also helped inflation to moderate since its peak last summer.

Besides manufacturing, high rates have hit banks particularly hard. Moodys said the rapid rise in rates has led to conditions that hurt profits for the broad industry, while knocking down the value of investments made when rates were super low.

Such conditions helped cause three high-profile failures for three U.S. banks earlier in the spring, which shook confidence in the system.

Moodys also said troubles may be coming for banks with lots of commercial real estate loans, which are hurting as the threat of a U.S. recession remains and work-from-home trends keep people out of offices.

M&T Bank, one of the banks whose credit rating Moodys downgraded, fell 4.7%.

Truist Financial, one of the banks that Moodys said its reviewing for a possible downgrade, fell 4.5%.

Other, larger banks whose credit ratings weren’t affected also sank.

JPMorgan Chase fell 2% and was one of the heavier weights on the S&P 500.

Later this week, the U.S. government will releases data on consumer and wholesale inflation, which could influence what the Federal Reserve does next with interest rates.

The hope on Wall Street is that the cooldown in inflation since its peak above 9% last summer will help persuade the Fed that upward pressure on prices is under control and no more rate hikes are needed.

Forecasters expect Thursdays data to show consumer prices rose by 3.3% in July over a year ago, an acceleration from Junes 3%.

But some economists and investors say getting that list bit of inflation moderation to the Fed’s target of 2% is likely to be the most difficult.

They’re saying Wall Street has become convinced too quickly that the Fed can achieve a soft landing for the economy and that the 19.5% run for the S&:P 500 through the first seven months of this year was overdone.

In the bond market, Treasury yields tumbled as investors moved into investments considered safer.

The yield on the 10-year Treasury fell to 3.98% from 4.10% late Monday. It helps set rates for mortgages and other loans.

The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 4.73% from 4.79%.

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Politics

Why Boris’s best mate is off to Reform

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Why Boris's best mate is off to Reform

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Former Conservative chairman and friend of Boris Johnson – Sir Jake Berry – is defecting to Reform UK, causing more problems for Tory leader Kemi Badenoch.

On today’s episode, Sky News’ Sam Coates and Politico’s Anne McElvoy discuss if his defection will divide parts of Reform policy.

Elsewhere, the Anglo-French summit gets under way, with Prime Minister Sir Keir Starmer hoping to announce a migration deal with French President Emmanuel Macron to deter small boat crossings.

Plus, chatter around Whitehall that No10 are considering a pre-summer reshuffle, but will it have any value?

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US

Donald Trump praises Liberian president’s English – the country’s official language

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Donald Trump praises Liberian president's English - the country's official language

Donald Trump has praised the Liberian president’s command of English – the West African country’s official language.

The US president reacted with visible surprise to Joseph Boakai’s English-speaking skills during a White House meeting with leaders from the region on Wednesday.

After the Liberian president finished his brief remarks, Mr Trump told him he speaks “such good English” and asked: “Where did you learn to speak so beautifully?”

Mr Trump seemed surprised when Mr Boakai laughed and responded he learned in Liberia.

The US president said: “It’s beautiful English.

“I have people at this table who can’t speak nearly as well.”

Mr Boakai did not tell Mr Trump that English is the official language of Liberia.

The country was founded in 1822 with the aim of relocating freed African slaves and freeborn black citizens from the US.

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Mr Trump promised the leaders of Liberia, Senegal, Gabon, Mauritania and Guinea-Bissau a pivot from aid to trade at the surprise meeting.

He described the countries as “all very vibrant places with very valuable land, great minerals, and great oil deposits, and wonderful people”.

Read more from Sky News:
Gaza permanent ceasefire ‘questionable’, says Israeli official
Four dead and ‘many’ kidnapped after Houthi rebels sink ship

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Later asked by a reporter if he’ll visit the continent, Mr Trump said, “At some point, I would like to go to Africa.”

But he added that he’d “have to see what the schedule looks like”.

Trump’s predecessor, President Joe Biden, promised to go to Africa in 2023, but only fulfilled the commitment by visiting Angola in December 2024, just weeks before he left office.

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Gaza permanent ceasefire ‘questionable’, says Israeli government

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Gaza permanent ceasefire 'questionable', says Israeli government

The Israeli government believes the chances of achieving a permanent ceasefire in Gaza are “questionable”.

The pessimistic assessment, in a top-level Israeli government briefing given to Sky News, comes as the Israeli Prime Minister prepares to leave Washington DC after a four-day visit which had begun with the expectation of a ceasefire announcement.

Benjamin Netanyahu will leave the US later today with the prospect of even a temporary 60-day ceasefire looking extremely unlikely this week.

Within “a week, two weeks – not a day” is how it was framed in the background briefing late on Wednesday.

Crucially, though, on the chances of the ceasefire lasting beyond 60 days, the framing from the briefing was even less optimistic: “We will begin negotiations on a permanent settlement. But we achieve it? It’s questionable, but Hamas will not be there.”

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Netanyahu arrives in US for ceasefire talks

Sky News has spoken to several Israeli officials at the top level of the government. None will be drawn on any of the details of the negotiations over concerns that public disclosure could jeopardise their chances of success.

But I have been given a very clear understanding of Mr Netanyahu’s thinking.

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The Israeli position is that a permanent ceasefire (beyond the initial 60 days, which itself is yet to be agreed) is only possible if Hamas lays down its arms. “If they don’t, we’ll proceed [with the war],” said a source.

The major sticking point in the talks between Hamas and Israel is the status of the Israel Defence Forces (IDF) inside Gaza during the 60-day ceasefire and beyond, should it last longer.

The latest Israeli proposal, passed to Hamas last week, included a map showing the proposed IDF presence inside Gaza during the ceasefire.

Read more: What is the possible Gaza hostage and ceasefire deal?

Israeli military vehicles stand near the Israel-Gaza border, in Israel.
Pic: Reuters
Image:
Pic: Reuters

This was rejected by Hamas and by Trump’s Middle East envoy, Steve Witkoff, who reportedly told the Israelis that the redeployment map “looks like a Smotrich plan”, a reference to the extreme-right Israeli finance minister, Bezalel Smotrich.

My briefing of Mr Netanyahu’s position is that he has not shifted in terms of Israel’s central stated war aims. The return of the hostages and eliminating Hamas are the key objectives.

But in a hint of how hard it will be to reconcile the differences, it was clear from my briefing that no permanent ceasefire is possible in the Israeli government’s view without the complete removal of Hamas as a political and military entity.

Hamas is not likely to negotiate its way to oblivion.

On the status of the Israeli military inside Gaza, a senior Israeli official told Sky News: “We would want IDF in every square metre of Gaza, and then hand it over to someone.”

Smoke rises in Gaza after an explosion, as seen from the Israeli side of the Israel-Gaza border.
Pic: Reuters
Image:
Pic: Reuters

It was clear to me that Mr Netanyahu wants his stated position to be that his government has no territorial ambition for Gaza.

One quote to come from my briefing, which I am only able to attribute to a senior Israeli official, says: “[We] don’t want to govern Gaza… don’t want to govern, but the first thing is, you have to defeat Hamas.”

Another clear indication of Mr Netanyahu’s position – a quote from the briefing, attributable only to a senior Israeli official: “You cannot have victory if you don’t clear out all the fighting forces.

“You have to go into every square inch unless you are not serious about victory. I am. We are going to defeat them. Those who do not disarm will die. Those who disarm will have a life.”

On the future of Gaza, it’s clear from my briefings that Mr Netanyahu continues to rule out the possibility of a two-state solution “for the foreseeable future”.

The Israeli government assessment is that the Palestinians are not going to have a state “as long as they cling to that idea of destroying our state”.

Read more:
UN Special Rapporteur criticises Israel
Why Netanyahu only wants a 60-day ceasefire
Trump applying ‘heavy pressure’ on Netanyahu

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On the most controversial aspect of the Gaza conflict – the movement of the population – the briefing revealed that Mr Netanyahu’s view is that 60% of Palestinians would “choose to leave” but that Israel would allow them to return once Hamas had been eliminated.

“It’s not forcible eviction, it’s not permanent eviction,” a senior Israeli official said.

Critics of Israel’s war in Gaza say that any removal of Palestinians from Gaza, even if given the appearance of being “voluntary”, is in fact anything but, because the strip has been so comprehensively flattened.

Reacting to Israeli Defence Minister Katz’s recent statement revealing a plan to move Palestinians into a “humanitarian city” in southern Gaza, and not let them out of that area, the official wouldn’t be drawn, except to say: “As a permanent arrangement? Of course not.”

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