U.S. stocks plummeted Wednesday as two economic prints showed a slowdown in the U.S. economy in February, while fresh turmoil at Credit Suisse (CS) renewed investor concerns over the banking sector.
The S&P 500 (^GSPC) dropped 0.7%, while the Dow Jones Industrial Average (^DJI) lost 0/9%. Contracts with the technology-heavy Nasdaq Composite (^IXIC) pared earlier losses and ended just above the flatline.
Bond yields plummeted. The yield on the benchmark 10-year U.S. Treasury note moved down to 3.49% Wednesday from 3.6% Tuesday. On the front end of the yield curve, two-year yields fell to 3.89%. Oil fell to new lows on the year, with WTI falling below $70 a barrel.
All three major indexes rallied Tuesday as crucial inflation data came in line with expectations. The S&P 500 closed up 1.7%, while the Nasdaq climbed 2.3%, marking the index’s best day in five weeks. Shares of regional banks rebounded, clawing back some of the recent losses.
But fresh troubles at Credit Suisse injected more jitters into markets Wednesday morning, but by the afternoon a Swiss regulator said the country’s central bank would provide additional liquidity if necessary. The European bank’s stock fell more than 20%, plunging to a record low after its biggest backer said it could not provide any more assistance. Credit Suisse on Tuesday disclosed in a report that it had identified “material weaknesses” in controls over financial reporting.
On the economic data side in the U.S., the Commerce Department said retail sales fell 0.4% over the last month, in line with the economist consensus compiled by Bloomberg. Meanwhile, February’s producer-price index, which measures what suppliers are charging businesses, dropped 0.1% in an unexpected decline.
Wednesday’s data came after Tuesday’s release of the closely watched Consumer Price Index (CPI), which the Commerce Department said rose 6.0% in February over the last year, the smallest increase since September 2021. In the same survey, core CPI, which strips out food and energy, grew 5.5%, also in line with expectations.
The sudden collapse of Silicon Valley Bank and Signature Bank, as well as the emerging turmoil at Credit Suisse, comes at a time when the economy grapples with stickier, if declining, inflation. It has sparked a debate among traders betting on whether or not the Fed will hike interest rates after its meeting next week.
Ryan Sweet, Chief US Economist at Oxford Economics, said as stress is contained mostly in regional banks, his team expects a quarter-percentage-point rate increase following the Fed’s upcoming March meeting.
“With inflation continuing to run well above the 2% target, a pause in the tightening cycle or a rate cut would be premature,” Sweet wrote. “Policymakers can use tools other than interest rates to alleviate pressures in the banking system.”
A similar sentiment came from William Blair’s macro analyst Richard de Chazal, who said in light of current events a quarter-point increase will probably be deemed “more prudent.”
The banking sector received a vote of no confidence Tuesday as Moody’s downgraded the entire U.S. sector’s outlook from stable to negative, citing “the rapid deterioration in the operating environment.”
Bank sentiment continued to be sour for members of the KBW Bank index (^BKX), as the index sank Wednesday. Large-cap index members including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all traded down Wednesday, however.
Renewed jitters remained in the banking sector regional bank stocks on Wednesday — First Republic Bank (FRC), PacWest Bancorp (PACW), Regions Financial (RF), and Zions Bancorporation (ZION) — all traded downward, while Western Alliance Bancorporation (WAL) traded up.
Here are some of the stocks trending on Yahoo Finance on Wednesday:
Credit Suisse (CS): The bank’s top shareholder ruled out offering further financial assistance to the lender. The shareholder cited regulatory concerns as the reason behind not being open to injecting more capital into the bank.
UBS Group AG (UBS): UBS chief executive officer Ralph Hamers said he will not answer any “hypothetical questions” following the turmoil at his rival Credit Suisse, Bloomberg reported.
Meta Platforms (META): Meta announced another 10,000 layoffs. The recruitment team is among those most affected by the job cuts, as the company plans to close 5,000 vacancies it had yet to fill. Citi boosted its target price to $260 from $228.
AMC Entertainment (AMC): The company said given a preliminary tally shareholders voted in favor of increasing the firm’s stock authorization and converting AMC Preferred Equity Units into common shares.
SentinelOne, Inc. (S): The cybersecurity company reported fourth-quarter earnings that showed total revenue increased 92% to $126.1 million, up from the year before when it came in at $65.6 million.
Advanced Micro Devices (AMD): The stock outperformed on Tuesday overall for large-cap technology stocks, following three straight days of declines.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv