US stocks were sharply lower on Wednesday morning as two economic data showed a slowdown in February combined with fresh turmoil at Credit Suisse (CS) weighing on sentiment.
The S&P 500 (^GSPC) plunged 1.4%, while the Dow Jones Industrial Average (^DJI) fell 1.6%. Contracts in the tech-heavy Nasdaq Composite (^IXIC) fell 1%.
Bond yields fell. The yield on the benchmark 10-year US Treasury bond fell to 3.4% on Wednesday morning, from 3.6% on Tuesday. At the front end of the yield curve, two-year yields fell to 3.8%. Oil fell to new lows throughout the year, with WTI falling more than 4% to below $70 a barrel.
All three major indices rallied on Tuesday as key inflation data came in in line with expectations. The S&P 500 closed up 1.7% while the Nasdaq climbed 2.3%, marking the index’s best day in five weeks. Regional bank stocks rallied, erasing some of the recent losses.
But new problems at Credit Suisse made markets more nervous on Wednesday. Shares of the European bank fell more than 20% to a record low after its biggest supporter said he could not provide any more aid. Credit Suisse said in a report Tuesday that it had identified “material weaknesses” in its financial reporting controls.
On the economic data side in the US, the Commerce Department said retail sales fell 0.4% last month, in line with the consensus of economists from Bloomberg. Meanwhile, the February producer price index, which measures what suppliers are charging companies, fell 0.1% in an unexpected drop.
Wednesday’s data came after Tuesday’s release of the closely-watched consumer price index (CPI), which the Commerce Department said rose 6.0% in February from last year, the smallest increase since September 2021. In the same survey of core CPI falling out Grocery and energy grew 5.5%, also in line with expectations.
The sudden collapses of Silicon Valley Bank and Signature Bank, and the emerging turmoil at Credit Suisse, come at a time when the economy is grappling with more persistent, albeit declining, inflation. It has sparked debate among traders who are betting on whether or not the Fed will hike rates after next week’s meeting.
Ryan Sweet, chief US economist at Oxford Economics, said that as stress persists mainly at regional banks, his team expects a quarter-point rate hike after the Fed’s upcoming March meeting.
“With inflation remaining well above the 2% target, a pause in the tightening cycle or a rate cut would be premature,” Sweet wrote. “Policymakers can use tools other than interest rates to ease the pressure on the banking system.”
A similar sentiment came from William Blair’s macro analyst Richard de Chazal, who said a quarter-point hike would likely be seen as “more prudent” given current events.
The banking sector received a vote of no confidence on Tuesday, as Moody’s downgraded the outlook for the entire US sector to negative from stable, citing “the rapid deterioration in the operating environment”.
Banking sentiment continued to be pessimistic for members of the KBW Bank Index (^BKX) as the index declined on Wednesday. However, large-cap index members such as Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) were all trading lower on Wednesday.
Renewed jitters lingered on Wednesday for the banking sector’s regional banking stocks — First Republic Bank (FRC), Western Alliance Bancorporation (WAL), PacWest Bancorp (PACW), Regions Financial (RF) and Zions Bancorporation (ZION) — all of which traded lower became.
Here are others trending stocks on Yahoo Finance:
Credit Suisse (CS):The bank’s top shareholder ruled out offering the lender any further financial support. The shareholder cited regulatory concerns as the reason he was unwilling to inject more capital into the bank.
UBS Group AG (UBS): UBS CEO Ralph Hamers said he would not answer “hypothetical questions” after the turmoil at his rival Credit Suisse, Bloomberg reported.
metaplatforms (META): Meta announced another 10,000 layoffs. The recruiting team is among the hardest hit by the downsizing as the company plans to close 5,000 vacancies it had to fill. Citi increased its price target to $260 from $228.
AMC Entertainment (AMC): The company said that based on a preliminary balance sheet, shareholders voted to increase the company’s stock listing and convert AMC Preferred Equity Units into common stock.
SentinelOne, Inc. (S): The cybersecurity company reported fourth-quarter earnings that showed total revenue increased 92% to $126.1 million from a year earlier when it was $65.6 million.
3M company (mmm): The stock is trading lower ahead of the company’s Investor Day.
Modern micro devices (AMD): The stock overall outperformed large-cap tech stocks on Tuesday after three straight days of decline.
On the earnings front, Adobe (ADBE); oats (OTLY); UiPath(PATH); Five Below (FIVE) will report quarterly earnings on Wednesday.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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