*
PacWest slumps as it looks at strategic options
*
First Horizon tanks as Canada's TD calls off buyout deal
*
Fed opens door to pause in tightening cycle
*
Indexes down: Dow 1.21%, S&P 0.83%, Nasdaq 0.50%
(Updates prices throughout; adds analyst comments in paragraphs
7 and 8)
By Ankika Biswas and Sruthi Shankar
May 4 (Reuters) - U.S. stock indexes fell on Thursday
after PacWest's move to explore strategic options deepened
concerns about the health of regional banks, with uncertainty
around the path of U.S. interest rates also weighing on the
mood.
PacWest Bancorp tumbled 49.7% to a record low after
confirming it was exploring strategic options, including a sale,
after shares of the regional lender and peers got hammered
recently on fears of a worsening banking crisis.
Regulators seized troubled First Republic Bank on Sunday and
JPMorgan Chase agreed to buy majority of its assets,
marking the largest U.S. bank failure since the 2008 financial
crisis.
Regional lenders including KeyCorp , Valley National
Bancorp and Zions Bancorp fell between 5.8% and
9.7%.
Western Alliance Bancorp tumbled 43.7%, with trading
in the stock halted multiple times. The lender denied a report
that it was exploring a potential sale that sent its shares down
more than 60%.
The KBW Regional Banking index dropped 4.0%, while
the S&P 500 Banks index fell 3.3%.
"The continued downside in regional banks will be a problem
for the market overall," said David Russell, vice president of
market intelligence at TradeStation.
"In many ways the Fed's continued hawkish slant is giving
short sellers a license to kill the banks, particularly the
regional banks."
The CBOE volatility index , also known as Wall
Street's fear gauge, rose to 21 points to touch its highest
since late March.
The Fed on Wednesday raised interest rates by 25 basis
points to the 5.00%-5.25% range and signaled a pause in its
policy tightening, giving officials time to assess the recent
bank failures, U.S. debt ceiling situation and sticky inflation.
However, U.S. stocks dropped on Wednesday after Chair Jerome
Powell said that it was too soon to say with certainty that the
rate-hike cycle was over as inflation remains the chief concern.
U.S. interest rate futures are factoring in a 62% chance of
rate cuts starting as soon as July, according to CME Group's
FedWatch Tool.
Data on Thursday showed the number of Americans filing new claims for jobless benefits increased last week as the labor market gradually softens amid higher interest rates, which are cooling demand in the economy. Apple Inc shares fell 1%. The iPhone maker is set to report quarterly results after the closing bell. At 11:49 a.m. ET, the Dow Jones Industrial Average was down 405.02 points, or 1.21%, at 33,009.22, the S&P 500 was down 33.95 points, or 0.83%, at 4,056.80, and the Nasdaq Composite was down 59.55 points, or 0.50%, at 11,965.77. Moderna Inc jumped 4.5% on stronger-than-expected sales for its COVID-19 vaccine for the first quarter. Qualcomm Inc slumped 5.7% after the chip designer's third-quarter forecasts missed estimates, while Paramount Global Inc tanked 28.1% after missing first-quarter revenue estimates amid a weak advertising market in its TV business. Canada's Toronto-Dominion Bank Group called off its $13.4 billion acquisition of First Horizon Corp , triggering a 37% drop in the U.S. regional bank's shares. Declining issues outnumbered advancers for a 2.63-to-1 ratio on the NYSE and a 1.80-to-1 ratio on the Nasdaq. The S&P index recorded four new 52-week highs and 24 new lows, while the Nasdaq recorded 37 new highs and 349 new lows. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Stocks and the Fed ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ankika Biswas and Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)
