U.S. Stocks Close Lower Amid Credit Rating Downgrades

U.S. stocks experienced a decline on Tuesday, although they managed to recover slightly from the session's lows. The drop followed Moody's Investors Service's decision to reduce its credit ratings for several regional banks in the United States, and its warning of potential downgrades for other major lenders.

The Dow Jones Industrial Average (DJIA) ended the day near 35,314, down approximately 158 points or 0.5%, as per preliminary FactSet data. Earlier in the session, the blue-chip index had been down around 300 points. The S&P 500 index (SPX) and the Nasdaq Composite Index (COMP) also saw losses of 0.4% and 0.8% respectively.

Specifically, the financial and materials sectors of the S&P 500 were the primary contributors to the overall decline on Tuesday. These sectors closed down 0.9% and 1.1% respectively. The market's reaction was influenced by Moody's decision to lower the credit rating of nearly a dozen regional banks, with six other major U.S. lenders being warned of potential downgrades. Moody's attributed these actions to the exposure of smaller and medium-sized banks to commercial real estate and the general risk posed by interest rates.

In addition to the credit rating concerns, investors were also closely monitoring the deepening economic slowdown in China.