Credit Suisse shares plunge as banking fears dent stocks

Stocks are tumbling on Wall Street Wednesday as worries about the strength of banks worsen on both sides of the Atlantic Ocean. 

The Dow was down 503 points, or 1.6%, 31,652 as of 11:25 a.m. Eastern time, the broader S&P 500 fell 1.4% and the tech-heavy Nasdaq Composite dropped 1%. Markets in Europe slumped even further as shares of Switzerland’s Credit Suisse tumbled to a record low.

The Switzerland-based Wall Street bank tanked following reports that its top shareholder will no longer pump more money into the struggling firm. Saudi National Bank representatives said they could not shore up their investments in Credit Suisse, citing regulatory concerns.

The banking giant in February reported its largest annual loss since the 2008 financial crisis, $1.5 billion, after clients pulled $88.3 billion from the bank in the first two weeks of October, fearing instability after a year of scandal and restructuring, Bloomberg reported.

Global problem

“Credit Suisse is not just a Swiss problem but a global one,” Andrew Kenningham, chief Europe economist at Capital Economics said in a research note. 

“The problems in Credit Suisse once more raise the question whether this is the beginning of a global crisis or just another ‘idiosyncratic’ case,” he said, noting that “it is not the only bank which has struggled with weak profitability in recent years.” Given that, plus the regional bank failures in the U.S.,”it would be foolish to assume there will be no other problems coming down the road,” Kenningham said.

Indeed, the three recent bank failures in the U.S. have investors on edge, and the Credit Suisse news prompted renewed selling in bank stocks both in the U.S. and Europe.

Concerns over stability of banking system 

Confidence in the banking system has eroded in just a matter of days following the failures of Silicon Valley Bank on Friday and Signature Bank on Sunday.

Most of the premarket decliners in the S&P 500 early Wednesday were regional banks, with Zion Bancorporation, KeyCorp, Commerce and Regions all sliding between 5% and 8%. Bigger banks also lost ground, with Wells Fargo, Bank of America and Citigroup all fell between 3% and 4%.

Banks have struggled for the better part of the year as higher interest rates has fewer people and businesses taking out loans, part of the Federal Reserve’s goal as it tries to cool the economy and bring down four-decade high inflation.

Investors returned to the bond market Wednesday, sending yields lower again after they recovered somewhat the previous day. The 2-year yield fell back down to 4.05% from 4.25% late Tuesday, and the yield on the 10-year slid to 3.53% from 3.69%.

Stocks rallied Tuesday after the government said consumer prices decelerated from the previous month, mostly in line with analysts’ expectations. The data showed core inflation, with volatile energy and food prices stripped out to show a clearer trend, was 0.5% in February over the previous month, edging up from January’s 0.4% gain. The Fed pays close attention to core inflation in deciding on monetary policy.

Investors fear Fed overreaction

Investors fear the Fed might respond to enduring upward pressure on prices by speeding up the pace of interest rate increases to dampen economic activity and inflation.

The Fed faces a dilemma over how to respond when banks already are under strain after the fastest pace of rate hikes in a decade knocked down prices of their assets.

“The Fed is stuck between a rock and a hard place,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

“Inflation met expectations, but couple it with a stern warning that if inflation trends don’t improve that they might need to hike more.”

Biden says banking system safe after two banks fail in a matter of days


He said the Fed also has other tools to use besides rate increases. Among them: The Fed could adjust the speed at which it’s shrinking its massive trove of bond investments, an action that effectively tightens the screws on the financial system.

President Biden and regulators have tried to assure the public that risks are contained and deposits in other banks are safe.

Later Wednesday, the government reports on retail sales, giving the Fed more data to chew on before its meeting next week where the central bank will decide whether or not to raise its main borrowing rate for the ninth time in a row.

In energy markets, benchmark U.S. crude slid $1.039 to $70.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $3.47 on Tuesday to $71.33. 

On Tuesday, the S&P 500 rose 1.7% and the Dow gained 1.1%. The Nasdaq composite added 2.1%.

Source :

Leave a Comment

SMM Panel PDF Kitap indir