Wall Street down, banks worry again

(New York) The New York Stock Exchange was trading lower on Wednesday shortly after the open as banking sector anxiety returned and a softening in Europe fueled risk aversion.

Around 10 a.m. EST, the Dow Jones returned 1.72%, the NASDAQ index was down 1.26%, and the broader S

“Bank stocks are moving the markets again” after the Saudi National Bank indicated that it would not increase its stake in the capital of Credit Suisse, a weakened institution of which it is the largest shareholder, noted Chris Low, of FHNFinancial.

In the wake of European banks, American establishments were again quarantined. Mid-size players and regional banks were the hardest hit, including California’s First Republic (-14.58%) and PacWest (-20.38%), as well as Phoenix, Arizona’s Western Alliance (- 6.16%).

But the tide was rising to some behemoths in the sector in the United States, such as Capital One (-6.00%), Citigroup (-5.14%) and Wells Fargo (-4.68%).

“There’s no smoke without fire,” commented Adam Sarhan of 50 Park Investments. “There is clearly a problem within the financial system, not just with a small regional bank in California. »

The VIX index, which measures market volatility, jumped more than 20% on Wednesday, indicating nervous investors.

“Until we see more clearly, everyone is getting into a defensive position,” said Adam Sarhan.

Just like Monday, operators rushed to the assets deemed the safest, primarily US Treasury bonds. The yield on 10-year US government bonds fell to 3.38% from 3.68% the previous day’s close.

A wave of bond buying causes their price to rise and their yield to fall, with the two moving in opposite directions.

The 2-year rate, which has been very volatile in recent months because it is more sensitive to operators’ expectations in terms of monetary policy, tumbled to 3.71%, the lowest in six months.

Usually supported by easing bond yields, the tech sector was weak, particularly semiconductor giant Broadcom (-1.77%) and graphics card maker Nvidia (-2.02%).

The Dow Jones fared little better, with virtually every constituent stock trading negative.

“The ingredients are in place for an episode similar to 2008,” says Adam Sarhan. “I’m not saying it’s going to happen, but the conditions are there. »

Given the climate of generalized tension, the operators paid little heed to the indicators of the day, which nevertheless had something to seduce them.

Producer prices fell 0.1% in February month on month, as economists forecast a 0.3% rise, an encouraging sign that inflation is slowing.

Separately, retail sales also fell 0.4% in February, still in line with expectations, while the index of industrial activity in the New York area, the Empire State Manufacturing Index, slipped in March to -24.6, significantly lower than expected (-7.6).

This deceleration in the economy, added to the turmoil in the banking system, prompted brokers to abruptly recalibrate their monetary policy forecasts.

On Wednesday, they gave the hypothesis of maintaining the key rate of the American central bank (Fed) unchanged, at the next meeting, a probability of almost 50%, the other scenario being that of an increase of a quarter point.

They also mostly saw the Fed lowering its rate by at least one percentage point by the end of 2023 compared to the current level, the opposite of the dominant forecasts a few weeks ago (1 point).