WFC - Nasdaq S&P Dow slide on financial sector jitters sparked by Credit Suisse rout

2023-03-15 11:40:48 ET

Wall Street's major averages on Wednesday opened more than 1% lower each after turmoil in European stocks caused by a plunge in shares of Credit Suisse reignited jitters about the financial sector. The worries overshadowed economic data that showed an unexpected fall in producer price inflation.

Investors were already wary after the recent collapse of Silicon Valley Bank ( SIVB ) and Signature Bank ( SBNY ) and the rout in regional bank stocks.

The tech-heavy Nasdaq Composite ( COMP.IND ) was down 1% to 11,314.94 points after the opening bell. The benchmark S&P 500 ( SP500 ) was lower by 1.51% to 3,861.30 points, while the blue-chip Dow ( DJI ) slipped 1.7% to 31,609.20 points.

Of the 11 S&P 500 sectors, 10 were trading in the red, led by a more than 4% fall in Energy. Financial stocks resumed their selloff after rebounding a day earlier.

Credit Suisse ( CS ) plummeted to a record low on Wednesday after its top shareholder ruled out providing any further financial assistance to the bank. Switzerland's second-biggest lender on Tuesday had said in its annual report that it had identified "material weaknesses" in its reporting procedures.

Broader European markets slid , with the pan-European Stoxx 600 down more than 2%.

The news from across the Atlantic weighed on investor sentiment at home and exacerbated worries about the health of the global financial system in light of the recent rout in the domestic financial sector after the shuttering of SVB and Signature Bank ( SBNY ).

Before the market open, index futures had quickly pared some losses after the release of the producer price index (PPI) report for February, which showed a -0.1% M/M fall in the headline number compared to an expected +0.3% rise. On a Y/Y basis, PPI rose +4.6%, much lower than the consensus figure of +5.4%. Meanwhile, retail sales dipped slightly more than expected in February by -0.4% M/M versus an anticipated fall of -0.3%.

Futures had given up the forward momentum soon after and had slumped to session lows.

Markets had appeared to shake off the financial sector jitters on Tuesday and had rebounded after economic data showed consumer prices in February had moderated from a month ago. Traders recalibrated their rate hike expectations on the data and skewed towards a probability of a 25 basis point hike at the Fed's monetary policy committee meeting next week.

Deutsche Bank's Jim Reid said Tuesday's rebound indicated that the backstopping of bank depositors is staving off an immediate crisis. "More medium term, we should view this episode as evidence that the tightening cycle is having an impact with the usual lag and events are unlikely to stop here."

But for now, Reid said crisis conditions are reversing. "This is evident across the board, with equities (including bank stocks) seeing a major recovery, and sovereign bond yields paring back a good chunk of their declines over recent days."

Treasury yields dipped on Wednesday. The 10-year Treasury yield ( US10Y ) was down 21 basis points to 3.43%, while the 2-year yield ( US2Y ) was lower by 47 basis points to 3.76%.

Among active stocks, financial names resumed their selloff. First Republic Bank ( FRC ) was the top percentage loser on the S&P 500 ( SP500 ) after S&P Global Ratings downgraded the bank to junk.

Wells Fargo ( WFC ) shares slipped amid the broader financial sector decline. The bank on Tuesday had filed for a $9.5B mixed shelf offering after hours.

More on the bank crisis

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