Stock Market Plunges as Banking Uncertainties Spread Across Global Markets
On Wednesday, the stock market opened with a massive plunge as fears of further banking instability spread across global markets. The Dow Jones Industrial Average (^DJI) fell more than 500 points, with the S&P 500 and Nasdaq Composite (^IXIC) both dropping around 1.5%.[0] Shares of Credit Suisse (CS) tumbled more than 26%, with other regional banks, such as First Republic Bank (FRC) and PacWest Bancorp (PACW), declining by 15% and 38% respectively.[1]
The turmoil can be traced back to the collapse of the Swiss bank SVB Financial, which sparked investor worries that banking problems could spread to other parts of the world. To reassure Americans, President Biden made an intervention, claiming that ‘Americans can have confidence that the banking system is safe'.[2]
The CME FedWatch tool now expects a 83% chance of a 25-basis-point rate hike at the March meeting.[3] Approximately 17% anticipate that rates will remain the same[4] The 10-year U.S. Treasury yield tumbled to 3.69%, before dropping further to 3.47%.[5]
The sell-off hit the Big Four trillion-dollar banks: Citigroup's share price dived 7.45%, Wells Fargo sank 7.1%, Bank of America plunged 5.8% and JP Morgan fell 1.8%.[6] Goldman Sachs (NYSE:GS) has recommended to “buy the dip” in bank stocks, including Charles Schwab (NYSE:SCHW), which has tumbled 30% since the SVB crisis.[7]
The stock market turbulence comes at a difficult time, with the US economy still reeling from the coronavirus pandemic. With the banking system now facing further uncertainty, investors will be keeping a close eye on the Federal Reserve's upcoming meeting.
0. “Stocks drop as fears grow about the global banking system” MPR News, 15 Mar. 2023, https://www.mprnews.org/story/2023/03/15/stocks-drop-as-fears-grow-about-the-global-banking-system
1. “Credit Suisse, Citi and more bank stocks tumble amid Silicon Valley Bank turmoil” ABC News, 15 Mar. 2023, https://abcnews.go.com/Business/bank-stocks-tumble-amid-silicon-valley-bank-turmoil/story?id=97878825
2. “Bank collapse hits home for Black-owned banks as Republicans blame ‘woke' culture” Yahoo News, 15 Mar. 2023, https://news.yahoo.com/bank-collapse-hits-home-for-black-owned-banks-as-republicans-blame-woke-culture-211511843.html
3. “Stock Market Today: Markets Rise as Bank Stocks Bounce” Kiplinger's Personal Finance, 14 Mar. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-markets-rise-as-bank-stocks-bounce
4. “Stock Market Sees Weekly Gains; Bank Stocks Recover While Warren Buffett Makes Big Move” Investor's Business Daily, 16 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/stock-market-trades-higher-bank-stocks-bounce-buffett-makes-move/
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. “$100BN wiped off US banking market in SINGLE DAY in bloodbath on Wall Street” Daily Mail, 13 Mar. 2023, https://www.dailymail.co.uk/news/article-11855573/100BN-wiped-banking-market-SINGLE-DAY-bloodbath-Wall-Street.html
7. “Buy the Dip in Banks? Morgan Stanley Disagrees” TipRanks, 13 Mar. 2023, https://www.tipranks.com/news/article/buy-the-dip-in-banks-morgan-stanley-disagrees
