Concern about regional banks remains
US investors are becoming more nervous ahead of the Fed’s interest rate decision
05/02/2023, 11:45 p.m
Has the regional bank crisis not yet bottomed out? After JP Morgan took over the struggling financial institution First Republic, investors on Wall Street fear that one more US bank is on the verge of collapse. In addition, the forthcoming Fed interest rate decision is causing nervousness.
The US stock exchanges fell on Tuesday. A day before the interest rate decision by the US Federal Reserve, nervousness prevailed. In addition, economic data from the world’s largest economy was weaker than expected, and concerns about the situation of the US regional banks resurfaced once again.
The Dow Jones Industrial finally fell by 1.08 percent to 33,684.53 points. The market breadth S&P 500 lost 1.16 percent to 4119.58 points. For the Nasdaq 100 it went down by 0.89 percent to 13,113.66 points.
The US economic data on that day subsequently painted a gloomy picture for March: Industrial orders in the last month of the first quarter grew less than expected. Excluding transport goods such as aircraft, they even fell compared to February. The number of vacancies also fell more sharply than expected. As for the Fed’s mid-week meeting, the majority are expecting a rate hike US Federal Reserve Rate by 0.25 percentage points. Therefore, the accompanying remarks will receive more attention. They are the ones who could ultimately have the power to steer the exchanges.
among the regional banks This time it mainly affected the shares of Pacwest. They fell by almost 28 percent, but not below the low of mid-March, when the regional banking crisis broke out. In March they were Silicon Valley Bank (SVB) and other smaller banks collapsed and at times caused severe upheaval on the stock markets.
Western Alliance Bancorp. lost 15 percent on Tuesday and Comerica as well as Zion’s Bancorp. gave more than ten percent each. The day before, the CEO of JPMorganJames Dimon said the current banking crisis is approaching after his takeover of the First Republic their end. At the same time, however, he had admitted that another smaller bank could possibly fail. First Republic is the third US bank to shut down due to rising interest rates and a lack of liquidity. “If First Republic can have a crisis of confidence, it can happen to any bank in this country,” said Longbow Asset Management’s Jake Dollarhide. Unfortunately, the collapse means that other regional banks that have gotten into trouble should probably “continue to sleep with their eyes open.” Investors are now wondering what that could be and accordingly threw the titles of other regional institutes out of their portfolios. The industry index fell by 5.2 percent.
Falling in the wake oil prices Stocks from the energy sector were also among the biggest losers. In the dow were the shares of chevrons Tail light with minus 4.3 percent. Not only did they give up gains after Friday’s strong quarterly earnings release, they fell back to where they were at the end of March. The North Sea crude oil variety Brent and the light US variety STI each fell by more than five percent.
In the S&P 100 atoned for ExxonMobilwhich also rose on Friday after a strong quarterly report, fell four percent. ConocoPhillips lost 3.8 percent. All of them suffered from the still significantly weakening oil prices, which market observers justified, among other things, with concerns about weaker economic development in China.
The papers of the pharmaceutical giant Pfizerwhich had jumped over 40 US dollars shortly after the start of trading after quarterly figures that were better than expected, ultimately fell by 0.4 percent to a good 39 dollars.
Shares of the travel agent Above increased by 11.6 percent. The taxi rival boosted revenue at the start of 2023 and contained the net loss significantly.
On the other hand, the share certificates of chegg, which lost almost half of its value and fell to its lowest level in six years. The specialist for educational materials disappointed with its forecast for the figures. He sees through the voice robot ChatGPT threatened its growth.
For Icahn Enterprises it fell by 20 percent to its lowest level since the end of March 2020. The short seller Hindenburg Research informed about a short position in the shares of the activist financial investor Carl Icahn, who is otherwise himself known for such actions. Short positions are used to bet on falling stock prices, which are therefore not bought beforehand, but only borrowed. The hope is to be able to buy back the shares at a lower price later, after the price losses.
The Euro was $1.1004 at the close on Wall Street. The European Central Bank set the reference rate in the afternoon (CEST) in Frankfurt at 1.0965 (Friday: 1.0981) dollars. The dollar thus cost 0.9119 (0.9106) euros.
At the bond market the futures contract for ten-year government bonds (T-Note Future) recently rose by 0.97 percent to 115.61 points. In return, the return fell to 3.43 percent.