Banking Crisis Causes Stock Market Plunge and Fed Interest Rate Speculation
The stock market was sharply lower on Wednesday as the banking crisis continued to worsen and spread to Europe, sending Credit Suisse Group’s shares plummeting more than 20% to their lowest level in history and pushing their credit default swaps near distressed territory.[0] Dow Jones futures fell 1.7%, S&P 500 futures slipped 1.8%, and Nasdaq 100 futures were down 1.6%.[1]
The 10-year Treasury yield trended down to 3.56%, while the 2-year yield plunged 23 basis points to 3.99%. Bond yields fell, and the yield on the benchmark 10-year U.S. Treasury note moved down to 3.4% Wednesday morning from 3.6% Tuesday. Two-year yields decreased to 3.8% on the front of the yield curve.
Retail sales figures showed a decrease of 0.4% in February from the previous month, which was greater than the anticipated drop of 0.3%, and a 3% increase in January.[2] In February, retail sales still climbed 5.4% from the same month a year prior.[2] Gold futures rose 1% to $1,929.90 an ounce, and the yield on the 10-year Treasury note fell 18 basis points to 3.45%.
The banking sector was hit hard, with shares of Credit Suisse Group AG plunging up to 25 percent, hitting a a new record low for the second day in a row, after the Swiss bank's largest investor said it could not provide more financial assistance to the lender.[3] Meta Platforms (META) also announced another 10,000 layoffs, and Citi boosted its target price to $260 from $228.[4]
This week, Chair Jerome Powell's comments and the buildup of economic data have triggered a discussion regarding whether the Federal Reserve is likely to increase rates by 0.25% or 0.50% at their March meeting.[5] Pricing indicates that there is a 51% probability of a quarter-point increase, while a 49% chance of no change is also possible. Expectations are uncertain.[6]
Cryptocurrencies have also been volatile, with Bitcoin falling while gold stocks and gold futures climbed due to their safe-haven status. In any case, the Federal Reserve will announce its decision next week and investors will be monitoring the bank's statements for clues about the future of the banking system.
0. “Citi, Goldman Lead US Banks Down Amid Credit Suisse Rout” Yahoo Finance, 15 Mar. 2023, https://finance.yahoo.com/news/citi-goldman-lead-us-banks-140327114.html
1. “Dow Jones futures fall 600 points following international bank shares' sharp decline” Washington Examiner, 15 Mar. 2023, https://www.washingtonexaminer.com/policy/economy/dow-jones-futures-fall-international-bank-shares-decline
2. “Stock Market News Today: New Jitters in the Financial Sector Send Stocks into the Abyss” TipRanks, 15 Mar. 2023, https://www.tipranks.com/news/stock-market-news-today-u-s-futures-trending-lower-despite-in-line-cpi-numbers
3. “Bank stocks tumble amid banking fallout, Credit Suisse falls 26%” msnNOW, 15 Mar. 2023, https://www.msn.com/en-us/money/markets/bank-stocks-tumble-amid-banking-fallout-credit-suisse-falls-26percent/ar-AA18F6tM
4. “Stock market news today: Stocks plummet, yields fall amid Credit Suisse turmoil” Yahoo News, 15 Mar. 2023, https://news.yahoo.com/stock-market-news-today-live-updates-march-15-2023-114153589.html
5. “Stock market news today: Stocks smoked after jobs beat and SVB collapses” Yahoo News, 10 Mar. 2023, https://news.yahoo.com/stock-market-news-today-live-updates-march-10-2023-123845899.html
6. “S&P 500 Dives as Banking Stress Triggers Market Tremors, Dollar Up on Haven Demand” DailyFX, 15 Mar. 2023, https://www.dailyfx.com/news/spx-sp-500-dives-as-banking-stress-triggers-market-tremors-forex-dollar-up-on-haven-demands-20230315.html
