The signs of stress on Wall Street have mounted amid the many uncertainties triggered by President Trump’s tariffs.
IPOs and mergers were put on the shelf. Leverage loan deals were shoved to the sidelines. Bond sales were paused.
The freeze-up of activity that followed Trump’s “Liberation Day” announcement last week made for some nervous days on Wall Street as Trump’s tariffs stoked recession fears. Tuesday offered some hope of a reprieve as stocks rallied in the morning, but that rally had fizzled by the end of the trading day.
A view of the floor at the New York Stock Exchange on Tuesday. (AP Photo/Seth Wenig) · ASSOCIATED PRESS
One concerning development is that there were no new offerings in the investment-grade and high-yield bond markets for three days, according to Reuters, as credit spreads widened due to concerns about the rising odds of a recession.
For companies with debt rolling over, the fear is that these higher borrowing rates could act as another pressure point and increase the future likelihood of defaults if the economy does take a turn downward.
Some banks also pressed pause on buyout financings due to fears that they might not be able to syndicate the loans, according to Bloomberg. There have also been struggles to refinance junk debt and private credit loans for certain clients, Bloomberg reported.
Another freeze on Wall Street came from big clients who put IPO plans on ice due to concerns about how such a move might be greeted by investors.
StubHub and Klarna (KLAR.PVT) decided to postpone their IPO roadshows, while another fintech company called Chime (CHIM.PVT) delayed its plans to go public, according to the Wall Street Journal.
Trading platform eToro Group Ltd. (ETTO.PVT) also paused its planned listing, along with MNTN Inc. and insurer Ategrity Specialty Holdings, according to Bloomberg. Some M&A deals are also on hold, according to Bloomberg.
“Investors and founders want to see stability,” Columbia professor Angela Lee told Yahoo Finance on Monday. “We are at an incredibly unstable place.”
A Wall Street sign is seen near the New York Stock Exchange on Tuesday. (AP Photo/Seth Wenig) · ASSOCIATED PRESS
Big bank CEOs were concerned enough about the chaos of this week to get on a call Sunday night, according to Sky News and Bloomberg. Sky News reported that the participants included Bank of America CEO Brian Moynihan and bosses from Citigroup, Barclays, and HSBC.
The turmoil heightens the stakes for the big Wall Street institutions as they prepare to report first quarter earnings in the coming days.
For the first three months of the year, analysts expect big bank profits to be down compared to the year-ago period at JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), and Wells Fargo (WFC), according to consensus estimates compiled by Bloomberg. Citigroup (C) and Morgan Stanley (MS) are both expected to be up.
“My view is earnings — I hate to say they don’t matter, but right now, we are in a macro market,” Devin Ryan, a financial analyst for Citizens Financial Group, told Yahoo Finance on Tuesday.
“What happens with tariffs, and really the ultimate economy, is what’s going to drive sentiment in these stocks,” Ryan added.
Executives may not be able to answer many of the questions investors want to know, according to KBW bank analyst Chris McGratty.
“A lot of the questions are going to be unanswerable because those questions, unfortunately, are not in control of these management teams. They’re in control of D.C.,” McGratty told Yahoo Finance.
Even before Trump announced his full slate of tariffs, there were already signs of a slowdown on Wall Street. Through February and March, US institutional loan issuance fell. So did US IPO and M&A activity, according to data from Apollo’s chief economist Torsten Slok. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Morgan Stanley analysts this week lowered their expectations for large and mid-cap bank earnings this year, downgrading their view of these groups from “attractive” to “in-line.”
They wrote that slower growth and increased uncertainty will “push out the nascent capital markets rebound, incrementally slow loan growth, and drive net charge offs across consumer and commercial loans.”
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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