By Sinéad Carew and Shubham Batra
(Reuters) - Wall Street's benchmark S&P 500 index closed up 0.5% on Tuesday but concerns about slowing economic growth stunted gains and the Dow dipped as bank stocks sank after warnings of current-quarter weakness while energy shares tumbled.
Energy was the biggest percentage decliner among the benchmark's 11 industry indexes, losing 1.9%, as crude oil futures fell after OPEC+ cut its 2024 and 2025 demand forecast.
Bank stocks fell broadly after Goldman Sachs (NYSE:GS) CEO David Solomon said late on Monday that trading revenue could fall 10% this quarter. On Tuesday, JPMorgan Chase (NYSE:JPM) tempered expectations about income from interest payments.
Also, the finance chief of smaller consumer lender Ally Financial said credit challenges have intensified this quarter, sending its shares down 17.6%.
The warnings from banks overshadowed an announcement by the Federal Reserve's regulatory chief of a plan to significantly ease an earlier proposal to raise big banks' capital.
"A lot of the action today is being driven by concern the banks are lowering expectations for earnings for the current quarter," said Lindsey Bell, chief strategist at 248 Ventures in Charlotte, North Carolina. "The news from JPMorgan, Goldman Sachs and Ally stole the show because they're saying that fundamentally their business is slowing down."
Investors fretted over the economic implications of weaker energy demand on top of uncertainty about the Fed's decision on interest rates next week and its comment on the economy. In addition, the U.S. presidential election looms on Nov. 5.
"We're getting these signs that economic growth across the globe is slowing and it adds angst when we already have such uncertainty here with the election cycle," Bell said, suggesting that September and October could be weak months for stocks.
Election uncertainty was in focus ahead of Tuesday's televised debate between Democratic presidential candidate Kamala Harris and Republican candidate Donald Trump as the two meet for the first time at 9 p.m. EDT (0100 GMT).
"Today, we're looking at three things: growth scares, low volume and a presidential debate tonight," said John Augustine, chief investment officer at Huntington National Bank.
But Augustine questioned investors' apparent extrapolation of JPMorgan's news "to the entire economy."
The Dow Jones Industrial Average fell 92.63 points, or 0.23%, to 40,736.96, the S&P 500 gained 24.47 points, or 0.45%, to 5,495.52 and the Nasdaq Composite gained 141.28 points, or 0.84%, to 17,025.88.
In the previous session, Wall Street's main indexes had recorded gains of more than 1% as investors started the week seeking bargains after last week's steep losses.
Investors will closely monitor the August consumer price index inflation report on Wednesday and the producer prices report on Thursday.
The S&P 500's financial industry index was the benchmark's second-weakest sector and its biggest index point drag on Tuesday with a 1% drop. Its biggest drags were JPMorgan Chase, down 5.2%,and Goldman Sachs, off 4.3%.
In other individual stocks, Hewlett Packard Enterprise, the S&P 500's biggest decliner on Tuesday - fell 8.5% after the server maker announced a $1.35 billion mandatory convertible preferred stock offering to fund its acquisition of Juniper Networks (NYSE:JNPR).
However, Oracle (NYSE:ORCL) shares rallied 11.4%, making it the S&P 500's biggest gainer, after the software company beat estimates for quarterly results.
Advancing issues outnumbered decliners by a 1.15-to-1 ratio on the NYSE, which registered 390 new highs and 159 new lows.
On the Nasdaq, 2,130 stocks rose and 2,014 fell as advancing issues outnumbered decliners by a 1.06-to-1 ratio. The S&P 500 posted 49 new 52-week highs and 13 new lows while the Nasdaq Composite recorded 48 new highs and 156 new lows.
On U.S. exchanges 10.75 billion shares changed hands, roughly in line with the moving average for the last 20 sessions.