Wall Street plummets as Credit Suisse triggers another bank sale

NEW YORK, March 15 (Reuters) – U.S. stocks fell sharply on Wednesday as turmoil at Credit Suisse rekindled fears of a banking crisis, eclipsing bets of a smaller rise in U.S. interest rates in March following a weak economic data.

Credit Suisse’s problems have increased pressure on the banking sector, reversing relief from emergency measures taken by US authorities to prevent contagion after the collapse of SVB Financial (SIVB.O) and its counterpart Signature Bank (SBNY.O).

Some investors believe aggressive US interest rate hikes by the Federal Reserve have caused cracks in the financial system.

“They’ve tightened up at the fastest and most dramatic pace we’ve seen since 1980 so I think this might be an opportunity for them to take a breather,” said Jack Ablin, CIO of Cresset Capital.

US-listed shares of Credit Suisse hit a record high, after its biggest investor said it could not provide more funding to the bank, triggering a rout among European lenders and also putting pressure on American banks.

“Anything negative from a highly visible institution, in this case Credit Suisse, will ripple through the financial sector,” said Michael James, managing director of equity trading at Wedbush Securities.

Data showed U.S. retail sales fell 0.4% last month after growing 3.2% in January. Economists polled by Reuters had expected a contraction of 0.3%.

A separate report showed that US producer prices fell unexpectedly in February, offering signs of hope in the fight against inflation a day after another reading showed inflation moderating at consumption last month.

This fueled investor hopes the Fed might slow its rate hikes. US Treasury yields fell as traders now expect even odds of a 25 basis point rate hike and a pause at the Fed’s March meeting.

First Republic Bank (FRC.N) fell 18.82% while PacWest Bancorp (PACW.O) fell 18.46%. Trading was repeatedly halted due to volatility, a day after shares of troubled banks rallied strongly.

Shares of Western Alliance Bancorp (WAL.N) rose 8.84% and banking and brokerage Charles Schwab Corp (SCHW.N) rose nearly 3.99%. Both stocks reversed early declines.

“In financial markets, you just have to look at those who might survive and don’t have as much investment risk on their portfolio,” said Jeffrey Carbone, managing partner at Cornerstone Wealth.

Major US banks including JPMorgan Chase & Co (JPM.N), Citigroup (CN) and Bank of America Corp (BAC.N) fell between 1% and 6%.

The KBW Regional Banking Index (.KRX) fell 2.28%, while the S&P 500 Banking Index (.SPXBK) fell 4.13%.

Most of the 11 major S&P 500 sectors were in the red, with energy (.SPNY) down 5.86% and leading the declines.

The Dow Jones Industrial Average (.DJI) fell 513.75 points, or 1.6%, to 31,641.65, the S&P 500 (.SPX) lost 56.26 points, or 1.44%, to 3,863.03 and the Nasdaq Composite (.IXIC) fell 85.52 points, or 0.75%, to 11,342.63.

Weighing in on the Dow (.DJI), Boeing Co (BA.N) lost 5.73% a day after the company said its aircraft deliveries fell in February.

Falling issues outnumbered rising ones on the NYSE by a ratio of 4.81 to 1; on the Nasdaq, a ratio of 3.05 to 1 favored the decliners.

The S&P 500 posted 1 new 52-week high and 35 new lows; the Nasdaq Composite recorded 10 new highs and 344 new lows.

Reporting by David Carnivale; Editing by David Gregorio

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