US stocks were down sharply on Wednesday morning as two economic releases showed a slowdown in February, coupled with further turmoil at Credit Suisse (CS) that weighed on sentiment.
The S&P 500 (^GSPC) plunged 1.4%, while the Dow Jones Industrial Average (^DJI) fell 1.6%. Contracts with the technology-heavy Nasdaq Composite (^IXIC) fell 1%.
Bond yields fell. The yield on the benchmark 10-year US Treasury fell to 3.4% on Wednesday morning from 3.6% on Tuesday. At the start of the yield curve, two-year yields fell to 3.8%. Oil fell to new lows for the year, with WTI falling more than 4% to below $70 a barrel.
All three major indexes rallied on Tuesday as crucial inflation data came in line with expectations. The S&P 500 closed 1.7% higher, while the Nasdaq climbed 2.3%, marking the index’s best day in five weeks. Shares of regional banks rebounded, recouping some of the recent losses.
But new problems at Credit Suisse injected more jitters into the markets on Wednesday. Shares in the European bank fell more than 20%, plunging to a record high after its biggest backer said it could no longer provide aid. Credit Suisse revealed in a report on Tuesday that it had identified “significant weaknesses” in financial reporting controls.
On the side of economic data in the United States, the Commerce Department said that retail sales fell 0.4% over the past month, in line with the consensus of economists respected by Bloomberg. Meanwhile, the February producer price index, which measures what suppliers charge businesses, 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 a year ago, the smallest increase since September 2021. In the same survey, the core CPI, which strips out food and energy, rose 5.5%, also in line with expectations.
The sudden collapse of Silicon Valley Bank and Signature Bank, as well as the emerging turmoil at Credit Suisse, comes at a time when the economy is grappling with more rigid, if not falling, inflation. This has sparked debate among traders betting on whether or not the Fed will raise interest rates after its meeting next week.
Ryan Sweet, chief U.S. economist at Oxford Economics, said with stress mostly contained in regional banks, his team expects a quarter-percentage-point rate hike after the Fed’s next meeting in March.
“With inflation continuing to hover 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 pressures on the banking system.”
A similar sentiment came from William Blair’s macro analyst Richard de Chazal, who said that in light of current events a quarter-point increase would likely be considered “more prudent”.
The banking sector received a vote of no confidence on Tuesday as Moody’s downgraded the outlook for the broader U.S. sector to negative from stable, citing “the rapidly deteriorating operating environment.”
Banking sentiment continued to sour for members of the KBW Bank Index (^BKX), as the index fell on Wednesday. Large-cap index members including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all traded on Wednesday, however.
On Wednesday, fresh worries lingered in the stocks of regional banks in the banking sector – First Republic Bank (FRC), Western Alliance Bancorporation (WAL), PacWest Bancorp (PACW), Regions Financial (RF) and Zions Bancorporation (ZION) – all traded down.
Here are others stock trends on Yahoo Finance:
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Swiss credit (CS):The bank’s major shareholder has ruled out offering further financial assistance to the lender. The shareholder cited regulatory concerns as the reason he was unwilling to inject more capital into the bank.
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UBS Group AG (UBS): UBS chief executive Ralph Hamers said he would not answer any “hypothetical questions” following the unrest at rival Credit Suisse, Bloomberg reported.
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Meta platforms (META): Meta announced another 10,000 layoffs. The recruiting team is among the hardest hit by the job cuts, as the company plans to close 5,000 positions it had not yet filled. Citi raised its target price to $260 from $228.
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AMC Entertainment (CMA): The company said that, based on a preliminary tally, shareholders voted to increase the company’s stock purchase authority and convert AMC’s preferred stock units. in ordinary shares.
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SentinelOne, Inc. (S): The cybersecurity company reported fourth-quarter earnings that showed total revenue rose 92% to $126.1 million, up from a year earlier, when it stood at 65, $6 million.
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3M Company (MMM): The stock is trading lower ahead of the company’s investor day.
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Advanced micro-systems (AMD): The stock outperformed across large-cap tech stocks on Tuesday, following three straight days of declines.
On the earnings front, Adobe (ADBE); Oatly (OTLY); UiPath(PATH); Five Below (FIVE) will release its quarterly results on Wednesday.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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