- First Republic Bank plunges over dividend suspension
- SVB Financial files for bankruptcy protection
- FedEx jumps to raise full-year earnings guidance
- Indices down: Dow 1.19%, S&P 1.10%, Nasdaq 0.74%
NEW YORK, March 17 (Portal) – Wall Street closed lower on Friday, marking the end of a turbulent week dominated by an unfolding crisis in the banking sector and the gathering storm clouds of a possible recession.
All three indices ended the session deep in negative territory, with financials (.SPNY) falling the most among the major sectors in the S&P 500.
While the benchmark S&P 500 closed higher than last Friday’s close, the Nasdaq and Dow posted weekly 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 Silicon Valley Bank and Signature Bank (SBNY.O) and contagion fears throughout triggered the global banking system.
“(The sell-off) is a bit of an overstatement,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “However, some of the concerns about overall liquidity and a possible liquidity crisis are valid.”
Those concerns have spread to Europe as Credit Suisse (CSGN.S) shares stumbled on liquidity worries, prompting policymakers to scramble to calm markets.
“This goes well beyond a run on SVB or First Republic, it’s about the real impact of these rate hikes on capital and balance sheets,” Pursche added. “And you see how it’s affecting big institutions like Credit Suisse, and that’s gotten people unnerved.”
Over the past two weeks, the S&P Banking Index (.SPXBK) and KBW Regional Banking Index (.KRX) plunged 4.6% and 5.4%, respectively, their largest two-week declines since March 2020.
First Republic Bank (FRC.N) tumbled 32.8% after the bank announced it would suspend its dividend, reversing Thursday’s gains that were buoyed by an unprecedented $30 billion bailout from major financial institutions -dollar was triggered
Among First Republic’s peers, PacWest Bancorp (PACW.O) fell 19.0%, while Western Alliance (WAL.N) declined 15.1%.
Credit Suisse shares traded in the US also closed significantly lower, down 6.9%.
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.
“This mini-banking crisis has increased the likelihood of a recession and accelerated the timeframe for the economy to slow down,” Pursche said. “It’s natural that the Fed should review its modus operandi, but it’s still very clear that inflation, while slowing, is still a matter of great concern and needs to be brought under control.”
At last glance, according to CME’s FedWatch tool, financial markets have priced in a 60.5% chance that the central bank will hike interest rates by 25 basis points and a 39.5% chance that it will leave the current rate unchanged .
The Dow Jones Industrial Average (.DJI) fell 384.57 points, or 1.19%, to 31,861.98, the S&P 500 (.SPX) lost 43.64 points, or 1.10%, to 3,916.64 and the Nasdaq Composite (.IXIC) fell 86.76 points 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 (FDX.N) rose 8.0% after raising its guidance for the current fiscal year.
Declining issues predominated on the NYSE at a 4.07 to 1 ratio; on the Nasdaq, a 2.94 to 1 ratio favored decliners.
The S&P 500 posted 5 new 52-week highs and 20 new lows; the Nasdaq Composite posted 29 new highs and 320 new lows.
Volume on US exchanges was 19.41 billion shares, compared to the average of 12.49 billion over the past 20 trading days.
Reporting by Stephen Culp in New York Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru Editing by Matthew Lewis
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