Stock Markets Tumble as Bank Worries Spread to Europe

Barry Adams
15 Mar, 2023
New York City

Stocks around the world received another downward jolt after banking woes rose in Europe, adding to more market jitters. 

Saudi National Bank, the largest investor in Credit Suisse, refused to increase its stake in the troubled Swiss bank. 

European banks plunged between 7% and 15% on the Credit Suisse news and raised the prospect of a government bailout of the Swiss bank. 

Bank stocks have been under pressure over the concern of interest rate risks leading to deposit risks and forcing many institutions to raise capital at the time when stock prices are falling.  

The Federal Reserve has increased rates eight times over the last 12 months, upending the near zero-rate policy for more than a decade. 

Treasury securities held by banks have declined in value following the sustained increase in interest rates, and total unrealized losses at the yearend 2022 were about $620 billion across all U.S. banks. 

Rates are still rising in the U.S. and rates have a long way to go in the Euro Area, raising concerns that interest rate risks  may lead to deposit risks or lead to wider bank runs at undercapitalized banks. 

In New York, regional banks accelerated declines on Wednesday reversing the gains of the previous day. 

 

Wholesale Inflation Eased In February 

Producer Price Index, a measure of wholesale inflation, seasonally adjusted declined 0.1% in February from the previous month, the U.S. Bureau of Labor Statistics said Wednesday. 

The core wholesale inflation,  less foods, energy, and trade services, increased 0.2% in  February after rising 0.5% in January. 

On an unadjusted basis, wholesale inflation rose 4.6% and core wholesale inflation increased 4.4% from a year ago. 

 

Retail Sales In February Edged Lower 

February retail and food services sales declined 0.4% from the previous month, the U.S. Census Bureau reported Wednesday. 

Retail and food services in the month rose 5.4% from the year ago and January sales data were revised to 3.2% increase. 

The monthly data are adjusted for seasonal variation and holiday and trading-day differences, but not for price changes. 

Retail trade sales were down 0.1% from January but increased 4.0% from a year ago. Food services and drinking places were up 15.3% while general merchandise stores were up 10.5% from last year.

 

Banks Drag Stock Indexes Lower 

The S&P 500 index declined 1.4% to 3,864.58 and the Nasdaq Composite index fell 1% to 3,864.58. 

 

Treasury Yields Inch Lower On Flight to Safety 

The yield on 2-year Treasury notes declined 43 basis points to 3.79%, 10-year Treasury notes eased 24 basis points to 3.39% and 30-year Treasury bonds dropped 14 basis points to 3.61%. 

 

U.S. Stock Movers 

Regional banks led the decliners today after rebounding in the previous session. 

PacWest Bancorp dropped 16% to $10.28, KeyCorp declined 2.8% to $11.82 and First Republic Bank fell 7.8% to $36.38 and Western Alliance Bancorporation increased 6.10% to $31.64. 

Credit Suisse Group AG plunged 23.5% to $2.08 after its largest investors Saudi National Bank refused to provide additional support to the troubled Swiss bank. 

Credit Suisse's woes added more pressure to already weak bank stocks and dragged down leading banks in Germany, France and Italy. 

BNP Paribas, Soicete Generale, Deutsche Bank and UniCredit declined between 7% and 10%. 

In New York, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup fell between 3% and 5%.