© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 16, 2023. REUTERS/Brendan McDermid
By Shubham Batra and Amruta Khandekar
(Reuters) – Wall Street’s main indexes fell more than 1% on Friday as efforts to provide lifelines for some regional lenders failed to allay investor fears of a broader banking crisis.
Large banks, including JPMorgan Chase & Co (NYSE:) and Morgan Stanley (NYSE:) had stepped in to inject $30 billion into the First Republic on Thursday, helping calm some nerves and lifting US stocks.
The momentum was short-lived and fears of a banking crisis gripped the market on Friday, with shares of Bank of the First Republic (NYSE:), which also suspended its dividend payment, falling 24.5%.
The lender’s shares have taken a beating this week, plunging 68%, in a bank sell-off following the recent collapse of SVB Financial and signature bank (NASDAQ:) sparked fears of a broader banking crisis stemming from rising interest rates.
SVB Financial said on Friday it had filed for a court-supervised reorganization under Chapter 11 bankruptcy protection to seek buyers for its assets.
Peer PacWest Bancorp fell 13.1%, while Western Alliance (NYSE:) fell 16.9%.
The big American banks, including JPMorgan, Citigroup (NYSE:) and fargo wells (NYSE:) also declined between 3.0% and 4.1%.
Most of the 11 major sectors fell.
The KBW regional banking index and the S&P 500 banking index each fell more than 9% for the week.
“Dow and S&P have taken a hit after the sell-off we had, especially in the financial sector, which sent them lower. Fears of what these potential bank failures could mean for the economy have led cyclicals to delayed,” said David Russell, vice president. Market Intelligence at TradeStation.
“At this point, how the Fed reacts to stress in the banking sector is really what matters, because that determines interest rates.”
News of the First Republic bailout came on the heels of a 50 basis point rate hike by the European Central Bank (ECB) despite concerns about the region’s banks after problems arose at Credit Suisse, which was falling 5.6%.
Investors now await the Federal Reserve’s interest rate decision, due next week, to assess how it will control inflation.
As US Treasury yields fell, mega-cap growth stocks Microsoft (NASDAQ:) and Alphabet (NASDAQ:) rose 0.2% and 0.5% respectively, providing some supportive of the Nasdaq, which is heading for its biggest weekly percentage gain in two months.
Money market participants now see a 67% chance that the Fed will raise rates by 25 basis points on March 22.
Meanwhile, data showed that production at US factories increased in February.
As of 11:49 am ET, the S&P 500 was down 456.83 points, or 1.42%, at 31,789.72, the S&P 500 was down 52.00 points, or 1.31%, to 3,908.28, and down 132.31 points, or 1.13%, to 11,584.97.
On a positive note, shares of FedEx Corp (NYSE:) rose 7.7% after the delivery giant raised its full-year earnings forecast.
Down issues outnumbered those up by a ratio of 5.46 to 1 on the New York Stock Exchange to a ratio of 3.56 to 1 on the Nasdaq.
The S&P Index posted four new 52-week highs and 18 new lows, while the Nasdaq posted 21 new highs and 201 new lows.
