(Reuters) – Wall Street finished down on Thursday as PacWest’s decision to investigate strategic alternatives fueled concerns about the health of US lenders, weighing on shares of regional banks as well as JPMorgan Chase (JPM.N), Wells Fargo & Co (WFC.N), and other large financial institutions.
PacWest Bancorp (PACW.O) fell 51% after confirming it was considering strategic alternatives, including a sale. Shares of the regional institution and other banks have lately been pummelling on worries of a growing financial crisis.
Western Alliance Bancorp (WAL.N) fell almost 39%, with trading paused several times. Western Alliance shares were down more than 60% at the session low, and the lender disputed reports that it was considering a sale.
Both Comerica (CMA.N) and Zion Bancorporation (ZION.O) fell roughly 12%. The KBW Regional Banking index (.KRX) finished down 3.5%, rebounding from its session low of around 7%.
Toronto-Dominion Bank Group (TD.TO) cancelled its $13.4 billion purchase of First Horizon Corp (FHN.N), causing a 33% drop in the US bank’s stock.
“Regional banks and tightening credit conditions are weighing on the market as investors try to recalibrate where we are in terms of credit cycles and bank lending standards, as well as when a potential recession may hit,” said Zhe Shen, managing director of diversifying strategies at TIFF Investment Management.
The CBOE volatility index (.VIX), popularly known as Wall Street’s fear gauge, reached a high of 21 points, its highest level since late March.
Nine of the 11 S&P 500 sector indexes fell, headed down by financials (.SPSY), which fell 1.29%, followed by communication services (.SPLRCL), which fell 1.26%.
The S&P 500 fell 0.72% to 4,061.22 points at the close. It was the market’s fourth consecutive session of declines, the longest such streak since February.
The Nasdaq dropped 0.49% to 11,966.40 points, while the Dow dropped 0.86% to 33,127.74 points.
Volume on US exchanges was quite high, with 12.0 billion shares moved, compared to an average of 10.5 billion shares traded in the preceding 20 days.
Regulators seized ailing First Republic Bank on Sunday, and JPMorgan Chase (JPM.N) agreed to acquire the bulk of its assets, marking the greatest bank collapse in the United States since the 2008 financial crisis.
According to CME Group’s FedWatch Tool, with investors more concerned about a worsening financial crisis and an economic downturn, U.S. interest rate futures prices currently signal traders primarily anticipate the U.S. Federal Reserve to lower rates by the central bank’s July meeting.
The Fed hiked interest rates by 25 basis points on Wednesday, but Chair Jerome Powell said it was too soon to conclude with confidence that the rate-hike cycle had ended since inflation remained the primary worry.
JPMorgan (JPM.N) fell 1.4% and Wells Fargo (WFC.N) fell 4.25% among the top US banks.
According to data released on Thursday, the number of Americans submitting new claims for unemployment benefits surged last week as the labour market steadily shrinks despite increasing interest rates, which are dampening economic demand.
Apple Inc (AAPL.O) fell 1% as the iPhone manufacturer reported quarterly data after the closing bell, including an update on money put aside for buybacks.
Moderna Inc (MRNA.O) increased 3.2% after reporting first-quarter sales of its COVID-19 vaccination that were higher than anticipated.
Qualcomm Inc (QCOM.O) down 5.5% after the chipmaker’s third-quarter predictions fell short of expectations, while Paramount Global Inc (PARA.O) fell around 28% after missing first-quarter revenue estimates due to a sluggish advertising market in its TV sector.
Within the S&P 500 (.AD.SPX), declining stocks outnumbered rising ones by a 2.4-to-1 ratio.
The S&P 500 set four new highs and 27 new lows, while the Nasdaq set 47 new highs and 412 new lows.