Charles Schwab Drops as Firm Plans To Shrink Bank

Major U.S. equities traded higher after several companies posted strong earnings results and a report showed that retail sales remained steady in June compared with the prior month, outperforming economists’ predictions.

Stocks also received a boost from increasing conviction among market participants that lower interest rates are forthcoming. According to CME Group’s FedWatch tool, traders are now pricing in a 100% chance that the Federal Reserve will cut its influential fed funds rate at its September meeting.

The S&P 500 added 0.6%, notching an all-time closing high. The Dow soared more than 700 points, or 1.9%, reaching a record close for the second straight day. After spending much of the session in negative territory, the Nasdaq rallied in the afternoon to post a daily gain of 0.2%.

Health insurance firms enjoyed a strong day on the stock market after industry giant UnitedHealth Group (UNH) beat second-quarter profit estimates, driven by increased revenue from its Optum health care unit. UnitedHealth shares added 6.5% following the strong results. Peers also posted gains, with shares of Molina Healthcare (MOH) jumping 8.2% to notch Tuesday’s top performance in the S&P 500.

Firmer confidence that lower interest rates are on the horizon helped lift shares of companies in the housing industry, with the promise of lower interest rates boding well for future homebuying activity. Shares of construction materials provider Builders FirstSource (BLDR) soared 8.0%. Shares of home builders also moved higher, with Pultegroup (PHM), D.R. Horton (DHI), and Lennar (LEN) all up more than 6.5%.

Warner Bros Discovery (WBD) shares jumped 7.6% after Bank of America pointed to numerous strategic options for the media conglomerate to create more value for its shareholders. Possible moves mentioned by the analysts include spinning off studio assets into a standalone company or merging its streaming services with another entity.

Shares of Match Group (MTCH), which operates Tinder and other online dating platforms, surged 7.5% amid news that activist hedge fund Starboard Value has acquired a stake worth approximately 6.6% of the company. In a letter to Match executives, Starboard stressed the need for improved margins and discussed the possibility of pursuing a sale to bring the company private.

Charles Schwab (SCHW) shares plummeted 10.2%, suffering the heaviest losses of any S&P 500 component. CEO Walt Bettinger said the financial services firm will downsize its bank to attempt to maintain profitability. According to reports, the firm plans to streamline its use of capital by relying on off-balance sheet deals with outside partners to hold customer deposits.

Other stocks in the financial services industry came under pressure following the warning from Schwab. Shares of Raymond James Financial (RJF) and Ameriprise Financial (AMP) fell 6.3% and 3.8%, respectively.

Progressive (PGR) shares slipped 3.2% after the property and casualty insurer reported mixed quarterly results, with earnings per share (EPS) exceeding estimates but revenue falling slightly short of expectations. Following the earnings release, Morgan Stanley maintained its “overweight” rating on Progressive stock, highlighting strong underwriting profitability, but analysts noted lower-than-expected personal auto policies in force (PIF) as a potential area of concern.