REUTERS – Wall Street’s main indexes fell on Friday as investors fled from risky assets on growing concerns that a contagion in the banking sector had not been fully averted despite assurances from key officials.
Treasury Secretary Janet Yellen said late on Thursday afternoon that measures will be taken to keep Americans’ deposits safe, but that did little to ease investor nerves about a liquidity crisis in the banking sector that could limit lending and tip the economy into a severe recession.
Yellen’s comments had helped stem a late-night slide in stocks in the previous session, as she softened her stance from Wednesday when she had unnerved investors by saying that blanket insurance of all deposits was not being considered. But investor mood turned sour again.
“Certainly global regulators and central banks are trying to ring fence any concerns that people have, but I’m not so sure people are yet quite convinced that there’s full stability there,” said Brandon Pizzurro, director of public investments at Guidestone Capital Management.
Shares of major U.S. banks such as JPMorgan Chase & Co, Wells Fargo and Bank of America dropped between 1% and 2% in early trade.
Shares of regional lenders First Republic Bank, PacWest Bancorp, Western Alliance Bancorp and Truist Financial Corp fell between 1% to 5%.
The S&P 500 banking index and the KBW regional banking index, hit their lowest since late 2020 in the previous session, fell 1.6% and 1.2%, respectively.
European banks also came under pressure after a report on a U.S. probe into Credit Suisse and UBS further soured the mood. Their U.S.-listed shares were down about 5.4% and 4.1%, respectively.
U.S. shares of Deutsche Bank fell nearly 10% after the bank’s credit default swaps rose to a four-year high.
U.S. two-year Treasury yields fell sharply to their lowest levels since September on Friday.
Traders’ bets have now shifted toward a pause in U.S. rate hikes in May, after the Fed signaled caution about its next move amid the global banking crisis, sparked by the failure of two regional banks.
Federal Reserve Bank of Atlanta President Raphael Bostic and St. Louis Fed President James Bullard said getting inflation lower was the central bank’s priority despite the banking sector stress.
Data on Friday showed orders for durable goods fell 1% last month against expectations of a 0.6% rise. A S&P Global survey showed that business activity gained steam in March.
At 9:45 a.m. ET, the Dow Jones Industrial Average was down 223.79 points, or 0.70%, at 31,881.46, the S&P 500 was down 30.76 points, or 0.78%, at 3,917.96, and the Nasdaq Composite was down 88.22 points, or 0.75%, at 11,699.18.
Nine of the 11 major S&P 500 sectors were in the red, with financials among the lead decliners.
Defensive plays such as utilities and consumer staples were the only sectors trading higher.
Activision Blizzard jumped 7.0% after the UK competition regulator dropped some competition concerns in the Microsoft-Activision deal.
Declining issues outnumbered advancers by a 3.18-to-1 ratio on the NYSE and a 2.86-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 34 new lows, while the Nasdaq recorded 11 new highs and 190 new lows.
https://www.reuters.com/markets/us/futures-waver-bank-worries-linger-investors-weigh-rate-hike-pause-2023-03-24/