Stocks tumble as Moody's warns it could cut credit ratings of 6 big US banks

Moody's has put the credit ratings of six large US banks, including Bank of New York Mellon, State Street and Northern Trust, under review for a possible downgrade, sending stocks tumbling as investors worried about more banking sector pain ahead.

The credit ratings agency said late Monday that its warning on the three banks reflected "ongoing strain" in the US banking sector, including increased pressures on funding and potential "weaknesses" in the amount of capital lenders are required to hold.

A lower credit rating could push funding costs for those banks even higher.

US stocks sank on the news. The Dow ended Tuesday's session 159 points, or 0.5% lower. The S&P 500 declined 0.4%, and the Nasdaq lost 0.8%.

Bank stocks in particular fell on the news. Wells Fargo lost 1.3%, JPMorgan Chase 0.6% and Bank of America 1.9%, among others. The KBW Bank Index fell 1.2%.

The US banking industry was shaken earlier this year by the collapse of Silicon Valley Bank, Signature Bank and First Republic in quick succession.

A series of interest rate hikes by the Federal Reserve, taking rates to their highest level in 22 years, has dented US banks, a factor Moody's mentioned.