NEW YORK – US stocks ended the trading day lower on Tuesday, with regional bank stocks recording another day of plummeting values ahead of an expected rate hike from the Federal Reserve.
The Fed is widely anticipated to raise its benchmark lending rate for a 10th – and possibly final – time on Wednesday as it looks to tackle high inflation through interest rate hikes.
The Dow Jones Industrial Average finished 1.1 per cent lower, at 33,684.46.
The broad-based S&P 500 fell 1.2 per cent to 4,119.60, while the tech-rich Nasdaq Composite Index declined 1.1 per cent to 12,080.51.
Crude oil futures also finished the day down more than five percent on regional banking concerns.
“Fear is a powerful emotion on Wall Street,” 50 Park Investments’ chief executive Adam Sarhan said in an interview.
“When fear takes over, logic is out the window,” he added.
The broader market reaction to the failure of First Republic Bank on Monday had led some analysts to predict that the worst might be over for regional banks.
But Tuesday marked yet another painful day for midsize banks, with the KBW Nasdaq Regional Banking Index ending the day down by more than 5.5 per cent.
“There is clearly worry that this bank situation is not going to come down after First Republic, it’s just going to get worse,” LBBW director Karl Haeling told AFP.
Among the embattled regional banks, Los Angeles’ PacWest saw its share price fall by almost 28 per cent, while Phoenix-based Western Alliance slid more than 15 per cent. New York-based Metropolitan Bank also saw its share price drop by more than 20 per cent.
But it may not be all doom and gloom for the broader US stock market, said Sarhan from 50 Park Investments.
Financial markets often move in a “big direction” before an interest rate decision, he said.
“It’s like the market is trying to put the pressure on the Fed to cut rates,” he added. AFP