Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 29, 2023.
Brendan Mcdermid | Reuters
Stocks fell sharply Tuesday, led lower by declines in bank shares, as traders braced for the latest Federal Reserve policy announcement.
The Dow Jones Industrial Average fell 480 points, or 1.4%. The S&P 500 also slid 1.4%, and the Nasdaq Composite dropped 0.9%.
Small and large banks fell, as traders questioned the future of some regional financial institutions after the crisis that engulfed Wall Street in March. Regional banks PacWest and Western Alliance had trading paused after tumbling more than 20%.
Meanwhile, JPMorgan Chase’s shares shed 1%, giving back some of its gains from the previous session. A day earlier, JPMorgan shares rose after the takeover of embattled regional First Republic Bank. Other large banks including Goldman Sachs, Bank of America and Citigroup also dropped more more than 2.5%.
“We think that the concerns around the bank sector, combined with uneasiness regarding the debt ceiling — and most importantly, apprehension over the uncertain future Fed rate policy stance — are all contributing to this risk off sentiment. So in an area like the bank sector that already was under stress, we’re also seeing greater unease because of these other contributing factors,” said Greg Bassuk, CEO of AXS Investments.
The Fed’s two-day policy meeting, which kicked off Tuesday, is expected to conclude with the central bank announcing another 25 basis-point rate hike. Per the CME Group’s FedWatch tool, traders are pricing in 97% chance of a rate hike. Investors will be looking for clues on whether the Fed will keep rates steady after this meeting, or if it will further tighten monetary policy to fight inflation.
Weighing on sentiment Tuesday was word from Treasury that the country may hit the debt ceiling sooner than expected. Treasury Secretary Janet Yellen warned on Monday that the U.S. may run out of measures to pay its debts…
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