Wednesday, May 3, 2023

Wall Street stocks fall as regional banking concerns return

NEW YORK: US stocks ended the trading day lower on Tuesday (May 2), with regional bank stocks recording another day of plummeting values ahead of an expected rate increase from the Federal Reserve (Fed).

The Fed is widely anticipated to raise its benchmark lending rate for a tenth – and possibly final – time on Wednesday as it looks to tackle high inflation through interest rate increases.

The Dow Jones Industrial Average fell 367.17 points, or 1.08%, to 33,684.53; the S&P 500 lost 48.29 points, or 1.16%, at 4,119.58; and the Nasdaq Composite dropped 132.09 points, or 1.08%, to 12,080.51.

Crude oil futures also finished the day down more than 5% 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%.

“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 Bancorp saw its share price fall by almost 28%, while Phoenix-based Western Alliance Bancorp slid more than 15%. New York-based Metropolitan Bank also saw its share price drop by more than 20%. Comerica Inc dropped 12.4%.

“There are concerns that this is not over, and that rates are going to (continue to) go up, and it could be a catalyst for more problems,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“There’s more and more talk about problems with commercial real estate”, an area associated with regional banks, she added.

Higher borrowing costs tend to hurt both consumers and businesses.

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.

The Cboe Volatility index closed at nearly a one-week high. – AFP, Reuters



Source: The Sun Daily

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