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First Republic Bank tumbles on suspending dividend
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SVB Financial seeks bankruptcy protection
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FedEx jumps on full-year profit forecast raise
(Adds analyst comment, updates to market close)
By Stephen Culp
NEW YORK, March 17 (Reuters) - Wall Street closed lower
on Friday, marking the end of a tumultuous week dominated by an
unfolding crisis in the banking sector and the gathering storm
clouds of possible recession.
All three indexes ended the session deep in negative
territory, with financial stocks down the most among the
major sectors of the S&P 500.
For the week, while the benchmark S&P 500 ended higher than
last Friday's close, the Nasdaq and the Dow posted weekly
declines.
SVB Financial Group announced it would seek Chapter
11 bankruptcy protection, the latest development in an ongoing
drama that began last week with the collapse of Silicon Valley
Bank and Signature Bank , which sparked fears of
contagion throughout the global banking system.
"(The sell-off) is a bit of an overreaction," said Oliver
Pursche, senior vice president at Wealthspire Advisors in New
York. "However, there is validity to some of the concerns
regarding overall liquidity and a potential liquidity crunch."
Those concerns have spread to Europe, as Credit Suisse shares stumbled over liquidity worries, prompting
policymakers to scramble to reassure markets.
"This goes a lot further than just a run on SVB or First
Republic, it goes to the real impact these interest rate hikes
are having on capital and balance sheets," Pursche added. "And
you're seeing it impact large institutions like Credit Suisse,
and that’s got people rattled."
The S&P Banking index and the KBW Regional Banking index both registered their largest two-week drop since March 2020, when the COVID-19 pandemic shoved the economy into its steepest and most abrupt recession on record. First Republic Bank plunged after the bank announced it was suspending its dividend, reversing Thursday's surge that was sparked by an unprecedented $30 billion rescue package from large financial institutions. First Republic's peers, PacWest Bancorp and Western Alliance , both ended the session sharply lower. U.S.-traded shares of Credit Suisse also slid. Investors now turn their gaze to the Federal Reserve's two-day monetary policy meeting next week. In view of recent developments in the banking sector and data suggesting a softening economy, investors have adjusted their expectations regarding the size and duration of the Fed's restrictive interest rate hikes. "This mini banking crisis has increased the chance of recession and accelerated the slowdown timeline for the economy," Pursche said. "It's natural that the Fed should re-examine its course of action, but it's still very clear that while inflation is slowing it's still very much a concern and needs to be brought under control." According to preliminary data, the S&P 500 lost 43.81 points, or 1.10%, to end at 3,916.47 points, while the Nasdaq Composite lost 87.63 points, or 0.75%, to 11,629.64. The Dow Jones Industrial Average fell 386.71 points, or 1.20%, to 31,858.95. On the upside, shares of FedEx Corp jumped after the package carrier hiked its current fiscal year forecast. (Reporting by Stephen Culp in New York Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru Editing by Matthew Lewis)
