US Stocks Fall as Banking Worries Spread to Europe Liberal-news

NEW YORK (AP) — Stocks fell again on Wall Street Wednesday as concerns about the health of banks on both sides of the Atlantic worsen.

The S&P 500 was down 1.5% in morning trading, while markets in Europe fell more sharply as shares of Switzerland’s Credit Suisse collapses to a record low. The Dow Jones Industrial Average was down 482 points, or 1.5%, to 31,672 as of 10:15 a.m. ET, while the Nasdaq Composite was down 1.2%.

Credit Suisse has been battling problems for years, including losses it suffered from the collapse of investment firm Archegos Capital in 2021. Its shares in Switzerland plunged more than 22% after reports that its largest shareholder will not inject more money. on your investment.

The harsh spotlight on Wall Street has intensified recently on the banking industry over concerns about what might break after the second and third largest bank failures in US history last week. US bank shares fell again on Wednesday after enjoying a brief one-day respite on Tuesday.

The biggest losses were focused on small and medium-sized banks, which are seen as more exposed to customers trying to withdraw their money en masse. First Republic Bank fell 7.7%, a day after rising 27%. Huntington Bancshares fell 5.7%

The biggest banks weren’t hit as hard, but they still fell. JPMorgan Chase fell 3.6%.

Much of the damage is seen as the result of the fastest barrage of interest rate hikes by the Federal Reserve in decades. The Fed has cut its key overnight rate to a range of 4.50% to 4.75%, from near zero early last year, in hopes of reducing painfully high inflation.

Higher rates can control inflation by slowing the economy, but they increase the risk of a recession later. They also hurt the prices of stocks, bonds and other investments. That last factor was one of the problems that plagued Silicon Valley Bank, which collapsed on Friday as high rates forced the value of its bond investments down.

The US government announced a plan late Sunday to protect depositors at Silicon Valley Bank and Signature Bank, which were shuttered by regulators over the weekend, in the hope of bolstering confidence in the banking industry. But since then the markets have gone from fear to calm and vice versa.

Some of the wildest action this week has been in the bond market, where traders are scrambling to guess what all the chaos will mean for future Fed action. On one hand, stress in the financial system could push the Fed to delay raising rates again at its meeting next week, or at least refrain from the larger rate hike it has planned. had been potentially signaling.

On the other hand, inflation remains high. While taking it easy on interest rates could give banks and the economy more breathing room, the fear is that such a move by the Fed could also give more oxygen to inflation.

Weaker-than-expected economic reports released Wednesday may have allayed some of those concerns. One showed that wholesale inflation slowed much more last month than economists expected. It is still high at 4.6% compared to a year earlier, but that was better than the 5.4% that was forecast.

Other data showed that the US retail spending fell more than expected last month, although spending in prior months was revised up. Meanwhile, manufacturing in New York state is weakening much more than expected. Such data could raise concerns about a recession on the horizon, but it may also take some of the pressure off inflation in the near term.

That caused the two-year Treasury yield to plummet. It tends to follow Fed expectations, falling to 3.79% from 4.25% late Tuesday. That is a massive move for the bond market. The two-year yield was above 5% just a week ago, at its highest level since 2007.

The 10-year Treasury yield fell to 3.41% from 3.69%. Helps set rates for mortgages and other major loans.

The weak economic data prompted traders to place bets that the Fed could end up holding rates steady next week. That’s a sharp change from earlier this month, when the only options seemed to be another 0.25 percentage point hike or an acceleration to 0.50 points.

In Europe, indices fell due to weak banks. France’s CAC 40 fell 3.5% and Germany’s DAX lost 3%. London’s FTSE 100 fell 3.1%.

They tracked earnings across much of Asia.

On Wall Street, companies in the oil and gas sector also slumped, as the price of crude fell more than 3%. They led a near sell-off within the S&P 500, where 90% of the stock fell.

Halliburton fell 8.2% and Schlumberger fell 5.7%

AP business writers Joe McDonald and Matt Ott contributed.

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