Wall Street slips on fears of contagion from banking crisis

First Republic Bank plunges over dividend suspension
SVB Financial files for bankruptcy protection
FedEx jumps to raise full-year earnings guidance
Indices down: Dow 1.31%, S&P 1.17%, Nasdaq 0.80%

NEW YORK, March 17 (Reuters) – Wall Street tumbled on Friday at the end of a tumultuous week marked by the unfolding crisis in the banking sector and gathering storm clouds of a possible recession.

All three indices were significantly lower in afternoon trade, with financials stocks (.SPNY) falling the most among the major sectors of the S&P 500.

While the benchmark S&P 500 is on track to close above last Friday’s close, the Nasdaq and Dow are setting the stage for declines.

SVB Financial Group (SIVB.O) announced it will file for Chapter 11 bankruptcy protection, the latest development in an ongoing drama that began last week with the collapse of SVB and Signature Bank (SBNY.O) and global fears of contagion triggered banking system.

“It feels like a month has passed since Monday,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta, who added, “Based on past experience, there will always be a concern that every time a financial institution gets into trouble, it does so systemically.”

“I don’t think there is a systemic problem in this sector,” he said. “Banks just haven’t kept up with the rates they have to offer to attract and retain deposits.”

Over the past two weeks, the S&P Banking Index (.SPXBK) and KBW Regional Banking Index (.KRX) are both down about 21%, their biggest two-week decline since March 2020, when the COVID-19 pandemic weighed on the economy into the steepest and most abrupt recession on record.

The day after news of an unprecedented $30 billion bailout from major financial institutions, First Republic Bank (FRC.N) plunged 26.0% after the bank announced it would suspend its dividend.

Among First Republic’s peers, PacWest Bancorp (PACW.O) fell 14.8%, while Western Alliance (WAL.N) declined 13.0%.

Investors are now turning their eyes to next week’s two-day Federal Reserve policy meeting.

Given recent developments in the banking sector and data pointing to a slowdown in the economy, investors have adjusted their expectations for the size and duration of the Fed’s tightening rate hikes.

At last glance, according to CME’s FedWatch tool, financial markets have priced in a 70.1% chance that the central bank will hike interest rates by 25 basis points and a 29.9% chance that it will leave the current rate unchanged .

The Dow Jones Industrial Average (.DJI) fell 423.76 points, or 1.31%, to 31,822.79, the S&P 500 (.SPX) lost 46.21 points, or 1.17%, to 3,914.07 and the Nasdaq Composite (.IXIC) fell 93.16 points, or 0.8%, to 11,624.12.

All 11 major sectors of the S&P 500 were recently in negative territory, with technology stocks (.SPLRCT) flirting with the flipping green.

On the upside, FedEx Corp (FDX.N) rose 8.1% after raising its guidance for the current fiscal year.

Declining issues predominated on the NYSE at a 4.55 to 1 ratio; on the Nasdaq, a 3.14 to 1 ratio favored decliners.

The S&P 500 posted 5 new 52-week highs and 19 new lows; the Nasdaq Composite posted 24 new highs and 242 new lows.

Reporting by Stephen Culp in New York Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.


(Visited 1 times, 1 visits today)

Leave a Reply

Your email address will not be published. Required fields are marked *