Banking crisis concerns rock Wall Street

NEW YORK (AP) — Stock markets rattled Wednesday on worries about the spreading banking crisis and questions about the severity of its effects on the economy, as stock prices and bond yields fell on both sides of the spectrum. ‘Atlantic Ocean.

The S&P 500 index plunged as much as 2.1% before ending the day down 0.7%, while European markets saw larger losses after shares of Swiss bank Credit Suisse fell at a record high. The Dow Jones Industrial Average lost 280 points, or 0.9%, after losing as much as 725 points. The Nasdaq Composite rose 0.1% after recovering from a sharp decline.

Markets pared losses towards the end of the session after the Swiss National Bank said it could provide help to Credit Suisse “if needed”.

But that only happened after Credit Suisse suffered a sharp drop that rocked investors around the world. Its shares in Switzerland fell 24.2% after it was announced that its largest shareholder would no longer inject money. The bank has spent years trying to recover from its problems, including losses it suffered related to the 2021 bankruptcy of investment firm Archegos Capital.

“They had some issues,” said Anthony Saglimbene, head of market strategy at Ameriprise. “This is happening at a time when there is more uncertainty and less confidence in the banking system.”

Wall Street has recently intensified its focus on the broader banking sector amid fears another institution could fail following the second and third largest bank failures in US history this week. last. U.S. bank stocks fell again on Wednesday, after pausing briefly on Tuesday.

The biggest losses were concentrated in small and medium-sized banks, which were seen as more exposed to customers trying to withdraw their money en masse. The biggest banks also fell, but not as much.

First Republic Bank fell 21.4%, a day after rising 27%. JPMorgan Chase fell 4.7%.

Some of the biggest swings this week have been in the bond market, where traders are scrambling to figure out what all the chaos will mean for future Federal Reserve action. On the one hand, stress in the financial system could cause the Fed not to raise interest rates again at its meeting next week, or at least to refrain from another rate hike, what had happened.

In contrast, inflation remains high. While easing interest rates could give banks and the economy a break, the fear is that this move by the central bank could also boost inflation further.

In total, the S&P 500 lost 27.36 points to end at 3,891.93. The Dow Jones lost 280.83 units and closed at 31,874.57, while the Nasdaq rose 5.90 points to 11,434.05.

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Associated Press writers Joe McDonald and Matt Ott contributed to this report.