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This Is the Reason the S&P 500 Headed South

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I would hardly call yesterday's 0.28 point move higher a decisive end to the S&P 500's (INDEX: ^GSPC  ) previous four day downturn, so it isn't surprising to, yet again, see the S&P 500 end lower by 4.25 points (0.25%), to 1428.59.

The biggest drag on the broad-market index today was the financial sector, which was headed by a melting pot of positive and negative news from JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) .

JPMorgan Chase can't win for trying. The bank reported a 37% increase in net income, as historically low mortgage rates and an improving housing market boosted mortgage lending revenue by 36%. Still, analysts are concerned that revenue growth streams for JPMorgan Chase are drying up, and the bank fell 1% on the day.

Wells Fargo didn't fare much better after reporting a 22% increase in its third-quarter EPS over the previous year. The big drag was a revenue shortfall, headlined by a 3.3% drop in wholesale banking, as well as overhang from being sued earlier in the week by U.S. regulators for not taking care in ensuring government-backed FHA loans over the past decade. My Foolish colleague Anand Chokkavelu recently ran down what this lawsuit could mean for investors.

On top of big news from the banking sector, a few other companies were notable big movers within the S&P 500.

Chipmaker Advanced Micro Devices (NYSE: AMD  ) once again found its way to the naughty column, ending down an S&P 500 worst of 14%, after announcing worse-than-expected preliminary third-quarter results. AMD had previously forecasted that its revenue would decrease by 1%, plus or minus 3%, but now anticipates reporting a 10% sequential decline in revenue. Gross margin is also expected to dive to 31% from 44% due to a $100 million writedown of excess inventory. AMD's reliance on weakening notebook sales, and its inability to command strong prices for its products, continue to doom its shareholders.

One notable exception to today's weakness was health and cleaning products supplier Ecolab (NYSE: ECL  ) , which actually rose 4% after agreeing to pay $2.2 billion to acquire Houston-based Champion Technologies. Champion's specialty chemicals offerings to the energy sector are very similar to what Ecolab already has represented in the area with a subsidiary Nalco. While diversifying its holdings, the purchase should also allow for cost synergies between Nalco and Champion. Personally, I like the move, although the company may be a bit pricey at current levels.

Mirror, mirror, on the wall...
Mirror, mirror, on the wall, who's the fairest bank of them all? Our analysts at Stock Advisor have picked through the skeletons at each of the major U.S. banks, and come up with only one that it feels is built to last. Find out the name of this bank, for free, by clicking here to get your copy of this latest special report.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of JPMorgan Chase, Wells Fargo, and Ecolab. Motley Fool newsletter services have recommended buying shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Related Tickers

10/27/2016 10:54 AM
^GSPC $2136.36 Down -3.07 -0.14%
S&P 500 INDEX CAPS Rating: No stars
AMD $7.31 Up +0.02 +0.27%
Advanced Micro Dev… CAPS Rating: **
ECL $115.01 Down -0.35 -0.30%
Ecolab CAPS Rating: *****
JPM $69.40 Up +0.27 +0.39%
JPMorgan Chase CAPS Rating: ****
WFC $46.42 Up +0.27 +0.59%
Wells Fargo CAPS Rating: ****