Banks Tumble as Wall Street's Worries Grow

Dow drops 367 points
By Newser Editors and Wire Services
Posted May 2, 2023 3:42 PM CDT
Banks Tumble as Wall Street's Worries Grow
Traders work on the floor at the New York Stock Exchange.   (AP Photo/Craig Ruttle, File)

Stocks slumped Tuesday after shares of beleaguered banks tumbled again and worries worsened about the economy. Rising fear sent yields sinking in the bond market, while Wall Street waited for the Federal Reserve’s latest move on interest rates and Washington edges closer to what would be a catastrophic default on US government debt. The S&P 500 fell 48.29 points, or 1.2%, to 4,119.58. The Dow Jones Industrial Average fell 367.17 points, or 1.1%, to 33,684.53 after earlier being down as many as 615 points. The Nasdaq composite fell 132.09 points, or 1.1% to 12,080.51.

Some of the sharpest drops came from smaller- and mid-sized banks , which have been under heavy scrutiny as the banking system shows cracks under the weight of much higher interest rates, the AP reports. PacWest Bancorp dropped 27.8%, Western Alliance Bancorp fell 15.4% and Comerica sank 12.4%. Three of the four largest US bank failures in history have come since March, and investors have been on the hunt for what could be next to topple or suffer a debilitating exodus by customers. Regulators seized First Republic Bank at the start of this week and sold most of it to JPMorgan Chase, which had raised hopes that the turmoil could ease.

Also pressuring the market was a report showing US employers advertised the fewest job openings in nearly two years during March. The job market has been one of the main pillars supporting a slowing economy, and a drop-off there would likely mean a recession. Such pressure is raising the stakes for the Federal Reserve, which began a two-day meeting on interest rates. The widespread assumption is that it will raise rates on Wednesday by another quarter of a percentage point. The widespread hope is that it will be the last increase for a long time. High rates have already hit the housing market sharply and hurt the banking system. Many investors are preparing for a recession to hit later this year.

(More stock market stories.)

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