Global markets: Wall Street sharply lower on bank contagion fears

All three indexes ended the session in negative territory, with financial stocks among the biggest losers in the S&P 500’s major sectors.

For the week, while the benchmark S&P 500 ended higher than the previous Friday’s close, the Nasdaq and Dow posted weekly losses.

SVB Financial Group announced it would seek Chapter 11 bankruptcy protection, the latest development in an ongoing drama that began last week with the collapses of Silicon Valley Bank and Signature Bank, sparking contagion fears across the globe. banking system,

“(Selling) is an overreaction,” said Oliver Persche, senior vice president at Wealthspire Advisors in New York. “However, there is validity to some of the concerns regarding overall liquidity and potential liquidity crunch.”

Those worries have spread to Europe, as Credit Suisse shares faltered on liquidity concerns, prompting policymakers to scramble to reassure markets.

“It goes a lot further than just running on SVB or First Republic, it goes to the actual impact that these interest rate increases are having on capital and on the balance sheet,” Persche said. “And you’re seeing it impact large institutions like credit SuisseAnd it caused an uproar among people.”

Over the past two weeks, the S&P Banking Index and the KBW Regional Banking Index declined by 4.6% and 5.4%, respectively, their biggest two-week declines since March 2020.

First Republic Bank plunged 32.8% after the bank announced it was suspending its dividend, reversing Thursday’s surge that was sparked by an unprecedented $30 billion rescue package from large financial institutions .

Among First Republic peers, PacWest Bancorp fell 19.0% while Western Alliance fell 15.1%.

US-traded shares of Credit Suisse also ended sharply lower, down 6.9%.

Investors are now eyeing the Federal Reserve’s two-day monetary policy meeting next week.

Investors have adjusted their expectations about the size and duration of the Fed’s restrictive interest rate hikes, given recent developments in the banking sector and data suggesting a softening of the economy.

“This mini-banking crisis has increased the likelihood of a recession and has accelerated the recession timeline for the economy,” Persche said. “It is natural that the Fed should re-examine its actions, but it is still very clear that while inflation is slowing, it is still of great concern and needs to be brought under control.”

At last look, financial markets priced in a 60.5% chance that the central bank would raise its key target rate by 25 basis points, according to CME’s FedWatch tool, and a 39.5% chance that it would leave the current rate unchanged. .

The Dow Jones Industrial Average fell 384.57 points, or 1.19%, to 31,861.98, the S&P 500 fell 43.64 points, or 1.10%, to 3,916.64 and the Nasdaq Composite fell 86.76 points, or 0.74%, to 11,630.51.

All 11 major sectors of the S&P 500 ended the session in negative territory.

On the upside, FedEx Corp jumped 8.0% after raising its forecast for its current fiscal year.

Issues declining compared to issues advancing on the NYSE by a 4.07-to-1 ratio; On the Nasdaq, a 2.94-to-1 ratio favored declines.

The S&P 500 posted 5 new 52-week highs and 20 new lows; The Nasdaq Composite recorded 29 new highs and 320 new lows.

Volume on US exchanges stood at 19.41 billion shares compared to an average of 12.49 billion over the last 20 trading days.

The text of this story is published from a wire agency feed without any modification.