Effects unclear
Banking turmoil hits Wall Street
03/17/2023, 9:45 p.m
The recovery was short. Disagreement over the consequences of the banking turmoil has buyers on the US stock exchanges stepping on the sidelines. Investors prefer to keep their powder dry ahead of the weekend and the possibility of more bad news.
At the end of the week, the US stock exchanges went down again. Fears of further problems in the banking sector and an impending recession continue to smolder – despite the injection of liquidity by a number of US banks into the First Republic Bank by $30 billion. Fears were fueled by the filing for bankruptcy protection by the mother of the authorities-closed and acquired Silicon Valley Bank (SVB), SVB Financial Group. Data from the US Federal Reserve also contributed to the uncertainty, according to which banks borrowed more than 150 billion dollars from the Fed last week. The week before it had been 4.4 billion.
“It’s been a ebb and flow this week, typically in big moves, because there really isn’t a consensus on how the tensions in the banking system will affect the economy,” said Wells Fargo investment executive Paul Christopher. Investors therefore played it safe and sold, especially in the run-up to the trade-free weekend, when it would not be possible to react immediately to possible new developments.
The Dow Jones Index lost 1.2 percent to 31,862 points. The S&P 500 gave way 1.1 and the Nasdaq Composite by 0.7 percent. The University of Michigan’s lower-than-expected consumer sentiment index in March, falling to its lowest level this year, also hurt sentiment.
The share of First Republic, which had recovered somewhat from its slide the day before, fell back sharply by over 32 percent. The bank has since canceled the dividend. For PacWest (minus 19 percent) and Western Alliance (minus 15.1 percent), which also ended up in the last line, things went downhill steeply, so to speak. The courses of the lender banks also fell: JP Morgan lost 3.8, Goldman Sachs became cheaper by 3.7, Citigroup around 3.0 and Bank of America by 4.0 percent. The sub-index for banks lost 4.5 percent, followed by the index for insurers (minus 3.5 percent).
The logistician FedEx meanwhile surprised with good figures for the third business quarter and increased the profit outlook. The price was boosted by 8 percent. Merck & Co fell by 3.0 percent. The pharmaceutical company has suffered a failure with a drug study. ford lost 4.4 percent. The car company has to order almost 1.3 million vehicles into the workshops to replace a brake hose that could break.
baidu increased by 6.3 percent. The Chinese company has received a license to operate driverless taxis in Beijing. There are positive comments about the Chinese chatbot. Experienced a course debacle Diebold Nixdorf, which plunged nearly 60 percent to a 45-year low. The manufacturer of ATMs, among other things, had reported liquidity problems.
After Thursday’s setback, bonds saw strong growth again, which was reflected in significantly falling yields. Yields had risen sharply the day before because the probability was higher that the US Federal Reserve would raise interest rates as planned in the coming week in the fight against inflation.
Gold was also sought after as a safe haven. The troy ounce rose by around 3 percent to its highest level in almost a year. The dollar weakened as US market interest rates fell. After recovering the day before, oil prices fell sharply again by around 3 percent. Concerns about the economy dominated here again.