US Stocks Retrace Early Wednesday’s Gains After Fed Raises Rates & Intensified Banking TurmoilMarch 23, 2023
US Stocks Retrace Early Wednesday’s Gains
The US stocks turned a good Wednesday around to end the day sharply lower after the Fed raised the base rate by 0.25%, hoping for a pause in rate hikes given the current financial crisis in the banking sector.
The three major stock indices in the US were fairly volatile before the Fed announcement. They saw the edge of the stock higher, then dip as investors took in the Fed’s policy meeting statements and the subsequent question and answer session. When the markets closed, the indices were down more than 1.585.
According to Jerome Chris Zaccarelli, the market’s rise was due to the indication of a rate pause. Then it was disappointed by the rise of 0.25% and the fact that a rate pause would not be imminent if the inflation rate continued to dwindle up the scale.
The Fed statement noted that there would be a need for further rate hikes if needed, but the statement also said that it was on the verge of pausing rate hikes given the current turmoil in the banking sector. The Fed chair remarked that the Fed would do all it could to ensure that the turmoil in the sector does not spread and become a bigger problem.
But, according to Sam Stovall, an economic strategist, the indices fluctuated because there was not much at stake, and maybe investors were showing discontent on learning the Fed’s stance in March. According to Reuters, a few factors affected the US stocks; the ears of the Fed’s aggressive stance in fighting inflation could tumble the economy into a recession.
In addition, the turmoil in the banking sector, especially from the SVB group and Signature Bank, exacerbated the sell-off in US stocks. At the same time, Janet Yellen’s comments pointed toward the FDIC not considering blanket insurance on deposits arising from problems in the banking sector. T
Stock Market Watch
The stock market experienced serious troubles, with the Dow Jones dipping by over 1.63% or 530 points to close the wild Wednesday at 32,031.00, while the S&P shed 65.9 points to end the day down 1.65%, landing at 3,936.97. The Nasdaq lost 190.5 points, which equals 1%, to end the day at 11,669.96.
The 11 major sectors of the S&P 500 all ended the day in the red, with real estate suffering the steepest drop in one day since September 2022. The banking sector reversed its two-day rebound, with the S&P banking index losing 3.7%, while the KBW regional bank shed 5.3%.
The troubled First Republic Bank’s shares dipped by 15.5% in volatile trade, with worries that it may be the next bank to go under. The Pacific Western Bank announced that it had raised over $1.4 billion in investments; however, its shares still slipped by a staggering 17.1%.
Nike Inc lost over 4.95% after the sports clothing giant raised its revenue projections but warned of immense pressures. Declining issues also beat the advancing New York Stock Exchange issues by a 2.25-1 ratio.
Carvana, an online e-commerce platform, saw a 6.3% gain following the company’s announcement that they expected a smaller loss in Q1 compared to Q4 last year. Likewise, Virgin Orbit saw an uptick of 33.1% due to the firm’s announcement that it would resume operations.