Wall Street slips on banking crisis contagion fears

  • First Republic Bank tumbles by suspending its dividend
  • SVB Financial files for bankruptcy protection
  • FedEx jumps on boost to full-year earnings forecast
  • Indices down: Dow 1.31%, S&P 1.17%, Nasdaq 0.80%

NEW YORK, March 17 (Reuters) – Wall Street fell on Friday at the end of a tumultuous week marked by the unfolding crisis in the banking sector and storm clouds gathering over a possible recession.

All three indexes were down sharply in afternoon trading, with financial stocks (.SPNY) the most down among major S&P 500 sectors.

For the week, while the benchmark S&P 500 index is on track to end higher from last Friday’s close, the Nasdaq and Dow Jones headed lower.

SVB Financial Group (SIVB.O) has announced that it will seek Chapter 11 bankruptcy protection, the latest development in an ongoing drama that began last week with the collapse of SVB and Signature Bank (SBNY .O), which sparked fears of contagion around the world. banking system.

“It feels like a month since Monday,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta, who added, “there will always be a concern based on past experience that any time a financial institution is in trouble, it’s systemic.”

“I don’t think there is a systemic problem in the industry,” he said. “Banks simply haven’t kept up with the interest they have to offer to attract and retain deposits.”

Over the past two weeks, the S&P Banking Index (.SPXBK) and KBW Regional Banking Index (.KRX) have both plunged around 21%, their biggest two-week decline since March 2020, when the COVID-19 pandemic has pushed the economy into its steepest and most brutal recession on record.

A day after news of an unprecedented $30 billion bailout from major financial institutions, First Republic Bank (FRC.N) plunged 26.0% after the bank announced that she suspended her dividend.

Among First Republic peers, PacWest Bancorp (PACW.O) fell 14.8% while Western Alliance (WAL.N) fell 13.0%.

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

Given recent developments in the banking sector and data suggesting a slowing economy, investors have adjusted their expectations regarding the magnitude and duration of the Fed’s restrictive interest rate hikes.

At last glance, financial markets have priced a 70.1% chance that the central bank will raise its policy rate by 25 basis points and a 29.9% chance that it will let the current rate hold, according to CME’s FedWatch tool.

The Dow Jones Industrial Average (.DJI) fell 423.76 points, or 1.31%, to 31,822.79, the S&P 500 (.SPX) lost 46.21 points, or 1.17%, to 3,914.07 and the Nasdaq Composite (.IXIC) fell 93.16 points, or 0.8%, to 11,624.12.

The 11 major sectors of the S&P 500 were the last in negative territory, with technology stocks (.SPLRCT) flirting with green.

On the upside, FedEx Corp (FDX.N) jumped 8.1% after raising its forecast for the current fiscal year.

Falling issues outnumbered rising ones on the NYSE by a ratio of 4.55 to 1; on the Nasdaq, a 3.14-to-1 ratio favored decliners.

The S&P 500 posted 5 new 52-week highs and 19 new lows; the Nasdaq Composite recorded 24 new highs and 242 new lows.

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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