Wall Street falls as Credit Suisse kicks off new bank sale

  • February retail sales, decline in producer inflation
  • Credit Suisse US stocks hit record lows
  • Regional bank stocks fall

NEW YORK, March 15 (Reuters) – U.S. stocks absorbed the losses late on Wednesday, but the Dow and S&P 500 closed still lower as troubles at Credit Suisse revived fears of a banking crisis, overshadowing bets on a smaller U.S. rate hike this month.

Benchmark indexes regained some ground in late trade after Bloomberg reported that the Swiss government was holding talks on options to stabilize the country’s banking giant. The Nasdaq composite closed slightly higher.

“We’re seeing movement in the headlines, but not severe headlines, which is good … I don’t think we’re in the 2008-2009 stages by any means when it comes to the contagion,” said Themis Trading’s co-head of trading Joe Saluzzi.

Still, Credit Suisse problems put more pressure on the banking sector after U.S. authorities eased investors with emergency measures to prevent contagion following the collapse of SVB Financial ( SIVB.O ) and Signature Bank ( SBNY.O ).

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

“They’ve been tightening at the steepest, most dramatic rate that we’ve seen since 1980, and so I think this could be the opportunity for them to pause,” said Cresset Capital CIO Jack Ablin.

US-listed shares of Credit Suisse hit a record low after its biggest investor said it could not provide more funding to the bank, starting a slide in European lenders and also pressuring US banks.

The selling put an early end to Wall Street’s tepid recovery in yesterday’s session.

“The pullback yesterday in financial stocks, the banks, made sense, but kind of the overriding factor here is a loss of confidence and it’s really fear of the unknown,” said Adams Fund CEO and senior portfolio manager Mark Stoeckle.

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

A separate report showed that US producer prices fell unexpectedly in February, a day after another reading showed moderate consumer inflation. This gave investors hope that the Fed could slow down its rate hikes.

US Treasury yields fell, and traders now expect even chances for a 25 basis point rate hike and a pause at the March Fed meeting.

The Dow Jones Industrial Average (.DJI) fell 280.83 points, or 0.87%, to 31,874.57, the S&P 500 (.SPX) lost 27.36 points, or 0.70%, to 3,891.93 and the Nasdaq Composite (5.9IC) added or .IXIC. 0.05% to 11,434.05.

First Republic Bank ( FRC.N ) fell 21.37%, while PacWest Bancorp PACW.O fell 12.87% and trading was halted several times due to volatility, a day after shares of the embattled banks posted a strong recovery.

Shares of Western Alliance Bancorp ( WAL.N ) and bank and brokerage Charles Schwab Corp ( SCHW.N ) bucked the trend to close up 8.3% and 5%, respectively. Both stocks reversed early declines.

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

Major U.S. banks including JPMorgan Chase & Co ( JPM.N ), Citigroup ( CN ) and Bank of America Corp ( BAC.N ) fell, pushing the S&P 500 banking index (.SPXBK) down 3.62%. The KBW Regional Bank Index (.KRX) fell 1.57%.

Most of the 11 major S&P 500 sectors were in the red, with energy (.SPNY) the worst performer, down 5.42%.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 3.34 to 1; on the Nasdaq, a 2.33 to 1 ratio favored decliners.

S&P 500 posted 3 new 52-week highs and 37 new lows; The Nasdaq Composite recorded 17 new highs and 379 new lows.

Reporting by David Carnevali; Editing by David Gregorio

Our standards: Thomson Reuters Trust Principles.

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