Stocks drop, yields fall amid turmoil at Credit Suisse

US stocks fell sharply on Wednesday as two economic reports showed a slowdown in the US economy in February and new turmoil at Credit Suisse (CS) renewed investor concerns about the banking sector.

The S&P 500 (^GSPC) fell 0.7% and the Dow Jones Industrial Average (^DJI) lost 0/9%. The technology-rich Nasdaq Composite (^IXIC) contracts cut past losses and ended just above the fixed line.

Bond yields plummeted. The yield on the benchmark 10-year US Treasury fell to 3.49% on Wednesday from 3.6% on Tuesday. At the leading end of the yield curve, two-year yields fell to 3.89%. Oil fell to a new yearly low, WTI fell below $70 a barrel.

On Tuesday, all three major indexes rose as important inflation data came in line with expectations. The S&P 500 closed up 1.7% while the Nasdaq edged up 2.3%, its best day for the index in five weeks. Shares of regional banks rebounded, offsetting some of the recent losses.

But new troubles at Credit Suisse sparked fresh market turmoil on Wednesday morning. By noon, the Swiss regulator said the country’s central bank would provide additional liquidity if needed. Shares in the European bank fell more than 25% at one point, falling to record lows after its biggest backer said he could no longer bail out. Credit Suisse said in a report Tuesday that it had identified “significant deficiencies” in its financial reporting controls.

In terms of US economic data, the Commerce Department said retail sales fell 0.4% over the past month, in line with Bloomberg’s consensus of economists. Meanwhile, the February Producer Price Index, which measures how much suppliers charge businesses, unexpectedly fell 0.1%.

Wednesday’s data came after Tuesday’s release of the closely watched consumer price index (CPI), which rose 6.0% year-over-year in February, the smallest increase since September 2021, according to the Commerce Department. food and energy rose by 5.5%, also in line with expectations.

The sudden collapse of Silicon Valley Bank and Signature Bank and the emerging turmoil at Credit Suisse come as the economy struggles with tighter, albeit declining, inflation. This has sparked a debate among traders who are betting whether the Fed will raise interest rates after next week’s meeting.

Ryan Sweet, chief US economist at Oxford Economics, said that with the stress mostly on regional banks, his team expects a quarter-point rate hike after the upcoming March Fed meeting.

“With inflation continuing to be well above the 2% target, a pause in the tightening cycle or a rate cut would be premature,” Sweet wrote. “Politicians can use tools other than interest rates to ease pressure on the banking system.”

A similar sentiment came from William Blair macro analyst Richard de Chazal, who said a quarter-point advance would likely be considered “more reasonable” in light of current events.

On Tuesday, the banking sector received a no-confidence vote as Moody’s cut its outlook for the entire US sector from stable to negative, citing “a rapidly deteriorating operating environment.”

Bank sentiment remained unfavorable for members of the KBW Bank Index (^BKX) as the index fell on Wednesday. However, large-cap index participants including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) traded lower on Wednesday.

On Wednesday, anxiety resumed in the banking sector. Shares of regional banks – First Republic Bank (FRC), PacWest Bancorp (PACW), Regions Financial (RF) and Zions Bancorporation (ZION) – traded lower, while Western Alliance Bancorporation (WAL) traded lower.

Credit Suisse bank logo in Geneva, Switzerland on February 22, 2023.  REUTERS/Denis Balibouse/

Credit Suisse bank logo in Geneva, Switzerland on February 22, 2023. REUTERS/Denis Balibouse/

Here are some of stocks are trending on Yahoo Finance on Wednesday:

  • Credit Suisse (KS): The bank’s largest shareholder ruled out offering further bailouts to the lender. The shareholder cited regulatory fears as the reason he is not ready to invest more capital in the bank.

  • UBS Group AG (UBS): According to Bloomberg, UBS chief executive Ralph Hamers said he would not answer any “hypothetical questions” following the unrest at rival Credit Suisse.

  • Platform Meta (META): Meta announced the layoff of another 10,000 people. The recruiting team has been hardest hit by the job cuts as the company plans to close 5,000 positions that have yet to be filled. Citi raised its target price to $260 from $228.

  • AMS Entertainment (AMS): The company said that, based on preliminary calculations, shareholders voted to increase the company’s shareholding and convert AMC preferred shares into common shares.

  • SentinelOne, Inc. (WITH): The cybersecurity firm reported fourth-quarter earnings that showed total revenue increased 92% to $126.1 million from last year’s $65.6 million.

  • 3M Company (MMM): Shares are trading lower ahead of the company’s Investor Day.

  • Advanced Micro Devices (AMD): Stocks outperformed any large-cap tech stock on Tuesday after three consecutive days of declines.

In terms of revenue, Adobe (ADBE); Oatmeal (EXCELLENT); UiPath(PATH); Five Below (FIVE) will publish quarterly results on Wednesday.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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