New York Stock Exchange opens lower, banks worry again

The New York Stock Exchange moved lower on Wednesday shortly after the opening with the return of anxiety relating to the banking sector and a decline in Europe, which favored a movement of risk aversion.

Around 2:00 p.m. GMT, the Dow Jones returned 1.72%, the Nasdaq index fell by 1.26% and the broader S&P 500 index by 1.63%.

“Bank stocks are moving the markets again” after the Saudi National Bank indicated that it would not increase its stake in the capital of Credit Suisse, a weakened establishment of which it is the largest shareholder, noted Chris Low, of FHNFinancial.

In the wake of European banks, American establishments were again quarantined. Medium-sized players and regional banks were the most affected, in particular the Californians First Republic (-14.58%) and PacWest (-20.38%), as well as the Phoenix (Arizona) brand Western Alliance (- 6.16%).

But the tide was rising to some behemoths in the sector in the United States, such as Capital One (-6.00%), Citigroup (-5.14%) and Wells Fargo (-4.68%).

“There’s no smoke without fire,” commented Adam Sarhan of 50 Park Investments. “There is clearly a problem within the financial system, not just with a small regional bank in California.”

The VIX index, which measures market volatility, jumped more than 20% on Wednesday, indicating nervousness among investors.

“Until we see more clearly, everyone is putting themselves in a defensive position,” said Adam Sarhan.

Just like Monday, operators rushed to the assets deemed the safest, primarily US Treasury bonds. The yield on 10-year US government bonds fell to 3.38% from 3.68% the day before closing.

A wave of bond buying causes their price to rise and their yield to fall, with the two moving in opposite directions.

The 2-year rate, which has been very volatile in recent months because it is more sensitive to operators’ expectations in terms of monetary policy, tumbled to 3.71%, the lowest for six months.

Usually supported by an easing in bond yields, the technology sector was at half mast, in particular the semiconductor giant Broadcom (-1.77%) and the graphics card manufacturer Nvidia (-2.02%).

The Dow Jones did little better, with almost all the stocks making up the index trading negative.

“The ingredients are in place for an episode similar to 2008,” says Adam Sarhan. “I’m not saying it’s going to happen, but the conditions are there.”

Given the climate of generalized tension, the operators paid little heed to the indicators of the day, which nevertheless had something to seduce them.

Producer prices fell 0.1% in February month on month, while economists forecast a rise of 0.3%, an encouraging sign of slowing inflation.

In addition, retail sales also fell by 0.4%, still in February, in line with expectations, while the industrial activity index in the New York region, the Empire State Manufacturing Index, slipped in March to -24.6, significantly lower than expected (-7.6).

This deceleration in the economy, combined with the turmoil rocking the banking system, prompted traders to abruptly recalibrate their monetary policy forecasts.

On Wednesday, they granted the hypothesis of maintaining the key rate of the American central bank (Fed) unchanged, at the next meeting, a probability of almost 50%, the other scenario being that of an increase of a quarter point.

They also saw the majority of the Fed lowering its rate by at least one percentage point by the end of 2023 compared to the current level, the opposite of the dominant forecasts a few weeks ago (+1 point).

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