Dow closes more than 250 points lower Wednesday as bank crisis spreads to Europe: Live updates
The Dow Jones Industrial Average fell Wednesday as concern over a banking crisis spreading to Europe pressured the broader market.
The 30-stock Dow ended 280.83 points, or 0.9%, lower at 31,874.57. The S&P 500 dropped 0.7% to 3,891.93. The Nasdaq Composite eked out a small gain, rising 0.05% to 11,434.05. The major averages ended the day well off their session lows. The Dow at one point was down 725 points, and the S&P 500 briefly gave up all of its 2023 gains.
The indexes regained some ground in afternoon trading following an announcement from a Swiss regulator that the country's central bank would give Credit Suisse liquidity if necessary. Investors were concerned after the Saudi National Bank, Credit Suisse's largest investor, said it could not provide any more funding.
The news came after the Swiss lender said earlier this week it had found "certain material weaknesses in our internal control over financial reporting" for the years 2021 and 2022. U.S.-listed shares of Credit Suisse closed nearly 14% lower.
In recent days, a crisis in the financial sector has centered around regional banks, as Silicon Valley Bank and Signature Bank collapsed. Both were casualties of poor management in the face of eight interest rate hikes by the Federal Reserve in the last 12 months. Attention turned to the big banks on Wednesday.
"We're seeing the bank turmoil that started in Silicon Valley, it's really spreading across the globe," said Edward Moya, senior market analyst at Oanda. "The markets are realizing that you're seeing the banks are in trouble because a lot of their profitability models have been based on, for the most part, zero-interest rates."
U.S. big bank shares declined in sympathy with Credit Suisse and the the European Bank sector. Citigroup slid 5.4%, while Wells Fargo and Goldman Sachs each lost more than 3%. The Financial Select Sector SPDR Fund (XLF) lost 2.7%.
Regional banks, which rebounded Tuesday to lift sentiment for the broader market, fell again Wednesday. The SPDR S&P Regional Banking ETF (KRE) lost 1.6%, pushed down by losses of more than 21% and 12% in First Republic Bank and PacWest Bancorp, respectively.
"There's just such so much information to digest," said Dan Eye, chief investment officer at Fort Pitt Capital Group. "Investors (are) scrambling to position around it."
Indexes are mixed at close
The three major indexes were mixed when the market closed.
The Dow and S&P 500 were down 0.9% and 0.7%, respectively. Meanwhile, the Nasdaq Composite was up just under 0.1%.
— Alex Harring
Jeremy Siegel raises his forecast for 2024, expects slowdown in rate cuts
Wharton finance professor Jeremy Siegel thinks next year will be a better year for markets.
"I think there's gonna probably be more softening in the second half of 2023, with earnings not being as good as I once thought," Siegel said on CNBC's "Closing Bell." "But I think that not raising [interest rates] as much as [the Federal Reserve] wanted to makes 2024 look an awful lot better to me."
Looking ahead to next week's meeting, Siegel expects the Federal Reserve to implement a 0.25 percentage point interest rate increase and signal a "lightweight pause" in its inflation-fighting efforts, noting cooling inflation and the unexpected decline in wholesale prices in February.
"They won't commit [to a pause] but I think the language is going to be totally different from the language we had after the last meeting," Siegel said about the upcoming Fed meeting. A sooner-than-expected rate cut could happen by June, he added.
— Pia Singh
1-3 year U.S. Treasury ETF sees streak of daily moves larger than a quarter-percentage point longer than at any point in past two decades
The 1-3 year US Treasury ETF (SHY) moved more than 0.25% for the fourth straight session on Tuesday. That's the longest streak of moves greater than a quarter of a percentage point since at the last two decades, according to Bespoke Investment Group.
Sept. 19, 2008 was the last time the fund notched three straight trading days of moves greater than 0.25% in either direction, Bespoke data shows. The ETF has not seen a four-day streak of moves above that size since at least 2002, the data shows.
The fund is on track to post another day of moves greater than 0.25% in Wednesday's session. Here's how the ETF has moved over the last five sessions:
— Alex Harring
SNB: Will provide liquidity to Credit Suisse if needed
The Swiss National Bank said Wednesday that it will provide banking giant Credit Suisse with liquidity if needed.
In a joint statement, the SNB and Swiss Financial Market Supervisory Authority said: "FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary."
Credit Suisse shares were under pressure Wednesday after the bank's largest investor said it wouldn't provide more financial assistance. U.S.-listed shares of Credit Suisse were last down more than 18%.
— Fred Imbert
Bank pressures grow as mindset within industry evolves, Peter Boockvar says
Peter Boockvar of Bleakley Financial Group said pressure on the financial sector was growing broadly because the bank failures have changed the mindset of the industry.
"What this is telling us is there's the potential for just a large credit extension contraction that banks are going to embark on [to] focus more on firming up balance sheets and rather than focus on lending," Boockvar said to CNBC's "Squawk Box" on Wednesday.
"It's a balance sheet rethink that the market's have," Boockvar added, citing that many banks may have bought longer maturity bonds that have reduced in value since the Fed started raising rates. "Also you have to wonder with a lot of these banks if they're going to have to start going out and raising equity."
— John Melloy
Nasdaq outperforms as Big Tech stocks rise
Some technology stocks bucked the broader market selloff trend on Wednesday, offsetting some of the Nasdaq Composite's losses and helping the tech-heavy index outperform.
As of 3:05 p.m. the Nasdaq traded flat, with Netflix and Alphabet up 3.3% and 2.7%, respectively. Amazon and Meta Platforms added about 1% each, while Microsoft gained 1.8%. Some software stocks, including Jack Henry & Associates and Akamai Technologies also moved higher.
Other rate-sensitive growth stocks also benefitted Wednesday as bond yields tumbled, with names like Zoom Video and Coinbase last up 2.5% and 3.2%, respectively.
— Samantha Subin
Credit default swaps on banks jump, led by big move in Credit Suisse
The price to insure against defaults in the banking sector rose Wednesday, with the 5-year credit default swaps on Credit Suisse bonds doubling in one day.
The 5-year CDS on Credit Suisse rose 102% at a record 983.66 Wednesday afternoon, much higher than those for other banks. For instance, UBS 5-year CDS climbed 31% to 101.77, and JP Morgan was up 8.6% at 98.17.
Citi upgrades Truist to buy
Citi Analyst Keith Horowitz upgraded Truist Financial to buy from neutral, saying investors are wrong about the deposit outlook at Truist. He expects shares can jump 60% after their recent drop.
"The TFC bear case is all about high HTM [held-to-maturity] losses relative to equity and we believe this thesis is flawed. Our view is that the deposit outlook is fine, meaning that securities can be held to maturity at par without realizing losses (just lower net interest margin over time from opportunity cost)," Horowitz wrote to clients on Wednesday.
— Sarah Min
Stocks remain down heading into final trading hour
The three major indexes remained in the red as investors entered the final hour of trading.
The Dow was down 1.1%, while the S&P 500 shed 0.9%. Meanwhile, the Nasdaq Composite was down just 0.1%.
All three indexes came off lows in afternoon trading.
— Alex Harring
Swiss regulators and Credit Suisse are reportedly discussing ways to stabilize the bank
Swiss regulators and Credit Suisse are in talks about options to stabilize the bank, Bloomberg News reported Wednesday afternoon, citing people familiar with the matter.
The ways being discussed included a potential liquidity backstop, the report said, adding that Credit Suisse has asked the Swiss central bank and regulators for public statements of support.
— Yun Li
Goldman Sachs cuts GDP forecast because of stress on small banks
Goldman Sachs on Wednesday lowered its 2023 economic growth forecast by 0.3 percentage points to 1.2%, citing a pullback in lending from small- and medium-sized banks amid turmoil in the broader financial system.
Analysts expect that small banks will attempt to preserve liquidity in case they need to meet depositor withdrawals, leading to a substantial tightening in bank lending standards that could weigh on aggregate demand. "Small and medium-sized banks play an important role in the US economy," they wrote.
Banks with less than $250 billion in assets comprise about 50% of U.S. commercial and industrial lending, the firm noted. Click here to read more.
— Pia Singh
Cathie Wood's innovation ETF reels in $400 million in one day
Cathie Wood's flagship Ark Innovation ETF (ARKK) reeled in $397 million in new money just Tuesday alone, notching the biggest one-day inflow since April 2021, according to FactSet.
Investors could be piling into the innovation fund under the belief that the current banking chaos could make the Fed pause its rate hike campaign, which would benefit growth stocks. Wood's disruptive tech darlings were among the hardest hit by rising rates over the past year.
— Yun Li
VIX spikes again as Credit Suisse turmoil worries markets
The CBOE Volatility Index, a closely monitored fear gauge and measure of volatility, jumped 18%, or more than four points, as Credit Suisse's woes spooked broader financial markets.
The measure, commonly referred to as the VIX, was last at 28, spiking again after jumping earlier in the week to levels not seen since at least 2022.
A VIX value greater than 30 is often associated with high volatility and risk.
— Samantha Subin
Energy stocks fall as oil tumbles 6% to lowest level in over a year
Energy stocks plunged Wednesday as oil prices tumbled around 7% to their lowest level since December 2021.
The move in oil prices pushed the S&P 500's energy sector down more than 6%.
Halliburton bared the brunt of the energy sector's losses, plummeting nearly 11%. Marathon Oil, which shed 10.1%. APA Corporation and Devon Energy slid more than 9% each, while SLB, Hess Corporation and Diamondback Energy dropped more than 8%.
The VanEck Oil Services ETF fell more than 8.7%, led to the downside by a nearly 14% drop in Transocean shares. The ETF was on pace for its worst day since September.
— Samantha Subin, Gina Francolla
Bank stocks making some of the biggest moves midday
These are some of the names moving the most midday Wednesday:
Credit Suisse — Shares of Credit Suisse plunged 25% after its biggest backer, Saudi National Bank, said it won't provide the Swiss bank with further financial help.
First Republic Bank — The regional bank stock tumbled 23%, giving back some of Tuesday's gains as turmoil at Credit Suisse rattled the broader sector and S&P Global Ratings downgraded its debt rating to BB+ from A-. PacWest shares slid 20%, while Western Alliance shares were last up 2%.
Energy stocks — Major energy stocks took a hit as oil stooped to its lowest level in more than a year. Halliburton and Marathon Oil shed more than 10%. APA Corporation and Devon Energy dropped 9%. Diamondback Energy slumped 8%.
Find the full list of stocks moving midday here.
— Samantha Subin
S&P 500 briefly turns negative for year in Wednesday's session
The S&P 500 briefly dipped below its flatline for the year.
Wednesday's slide brought the index within a percentage point of its flatline for most of the session, giving up most ground after an early 2023 rally pushed it up. The broad index at one point traded down so much that it was in the red for the year.
— Alex Harring
Utilities bucks broader market downturn
Utility stocks in the S&P 500 have side-stepped the broader market's fall in Wednesday's session.
The sector is up 1%, despite the broad index falling nearly 1.75% at the same time.
Axel Energy is leading the way for the sector, up 2.8%. Other top performers include American Electric Power, WEC Energy and Southern Company, which have all gained more than 2%.
Communication services was the only other of the 11 sectors to advance in Wednesday's session, as advances of more than 1% in Alphabet, T-Mobile and Netflix helped push the sector up a relatively modest 0.2%.
On the other hand, energy and materials were the two worst performing sectors, dropping 6.2% and 4.4%, respectively.
— Alex Harring
Some Big Tech, software stocks outperform
Some technology and software stocks outperformed Wednesday as troubles at Credit Suisse spooked investors and the broader market.
The bright spots included Microsoft and Netflix, up 0.6% and 1.8%, respectively. Alphabet shares were modestly higher.
SentinelOne shares surged nearly 9% after posting a smaller-than-expected loss for the latest quarter. Akamai Technologies and Jack Henry & Associates also moved slightly higher.
Rate-sensitive technology stocks have benefitted recently from the downtick in yields. Higher rates typical means valuations are less attractive for tech stocks, by making future profits less valuable.
— Samantha Subin
High-yield not showing deep stress as investors rush into safe haven Treasurys
High yield corporate bond spreads to Treasurys are at the widest they've been this year, but still well below last year's highs.
Peter Boockvar of Bleakley Financial Group said the Bloomberg Corporate High Yield Bond Index was yielding 8.87% Tuesday, compared to a high of 9.88% last October. Yields move opposite price.
Investors watch high-yield debt among other things for signs of credit stress in times of concern.
"We're around the widest since Jan. 3, so it's given back all the spread narrowing we've seen this year," he said.
The spread of the high yield index to Treasurys was about 470 basis points Tuesday. Boockvar said it began the year at about 470 basis points, but dipped to about 385 in February. A basis point equals 0.01 of a percentage point.
"We're still 100 basis points narrower than last July," he said. "Treasury yields collapsed so also part of this is the drop in Treasurys."
Boockvar noted that the prices of both iShares iBoxx $ High Yield ETF, HYG and the Invesco Senior Loan ETF, BKLN were near the lows of 2023, but still above last year's lows.
At the same time, investors are pouring into the safety of Treasurys. The 2-year yield fell to 3.81%. It was at about 4.24% late Tuesday.
— Patti Domm
Mohamed El-Erian says the Fed's credibility is at stake as pressure mounts on the banking sector
The Federal Reserve failed to slow down its aggressive rate hikes in time, and now as a series of bank crises mount, the central bank's credibility is on the line, said economist Mohamed El-Erian.
His comments come as the U.S.-traded shares of Credit Suisse sank to an all-time low in trading Wednesday. The massive sell-off comes after the Swiss bank, already embattled by a series of regulatory scandals, said its largest investor, Saudi National Bank, could not provide it with any further financial assistance. This news renewed the rout in U.S. bank stocks that began last week with troubles at Silicon Valley Bank and Signature Bank.
As the Federal Reserve continues to digest new economic data indicating where it stands on the fight against inflation, El-Erian sees the institution's credibility at stake after it "didn't slow down in time [and] slammed on the brakes."
CNBC Pro subscribers can read more about his insights here.
— Hakyung Kim
Two bond ETFs are popping as spooked investors run for safety
The Vanguard Total Bond ETF (BND) and iShares Core U.S. Aggregate Bond ETF (AGG) are on pace for their best day since Nov. 10. On that day, BND rose 2.07%, while AGG added 2.15%.
The gains for these two ETFs coincide with a broad selloff for stocks amid global worries about the banking sector. Treasury yields have also fallen as investors snap up these U.S. government bonds.
Both BND and AGG offer broad exposure to U.S. investment grade bonds. They also have hefty allocations toward U.S. Treasurys and issues from the Federal National Mortgage Association and the Government National Mortgage Association – known as Fannie Mae and Ginnie Mae.
— Darla Mercado, Gina Francolla
Credit Suisse bond yields jump, credit default swaps race higher
Credit Suisse Group bonds sold off sharply, as the price of insuring those bonds also raced higher.
Credit Suisse 5-year credit default swaps reached a record high 694.83 Wednesday, according to Refinitiv. UBS' 5-year CDS was at about 88 Tuesday, while JP Morgan Chase 5-year CDS was at about 83.
By comparison, Credit Suisse reached a high of about 255 during the financial crisis in March, 2009, according to Refinitiv.
Credit Suisse's 10-year corporate bond was yielding more than 9% Wednesday. The bank's stock was also down about 17%.
A credit default swap allows investors to protect their holdings in a company or sovereign's bonds, against the chances of a default.
Euro on pace for worst day in almost three years
The Euro is down 1.84% against the dollar, falling to $1.0535 as of 11:05 a.m. ET. It is currently on track for its worst day since Mar. 19, 2020 when it fell 2.043% against the dollar.
The dollar index is up 1.28%, on pace for its best day since Mar. 7, when the index gained 1.21%. It is up 0.2% week-to-date and its sixth positive week in seven weeks.
— Hakyung Kim
Dow hits session low coming out of first hour of trading
The Dow briefly notched a new session low as investors entered the second hour of trading.
The 30-stock index was down just over 610 points, or 1.9%, shortly after 10:45 a.m. ET. The Dow previously hitting a session low of 602 points down.
The S&P 500 and Nasdaq Composite, meanwhile, also continued trading in the red. The S&P 500 slide brought the broad index within 0.3% of its flatline for the year.
— Alex Harring
WTI hits lowest level since December 2021
U.S. West Texas Intermediate crude hit its lowest level in more than a year as troubles at Credit Suisse spooked markets.
WTI hit a low of 67.93, its the lowest level since Dec. 20, 2021, when it traded as low as 66.04.
Oil rose earlier in the session after data showed economic activity improve in China in the first two months of the year.
— Samantha Subin, Gina Francolla
Treasury yields plummet as expectations for a Federal Reserve rate hike fade
Treasury yields fell at a stunning pace, as futures showed sharply reduced expectations the Federal Reserve would raise interest rates next week.
"Liquidity has been poor the last couple of days, but volumes have been high, which tells me a lot of people are doing trades they feel compelled to do, rather than ones they want to do," said Michael Schumacher, director rates strategy at Wells Fargo.
The 2-year yield Treasury yield, which most reflects Fed policy, was at 3.78%. It was at 4.24% in late U.S. trading Tuesday, before new worries about the banking system emerged. Credit Suisse shares tanked after reports that Saudi National Bank could provide no further financial support. Stocks fell sharply as that reignited concerns across the banking sector.
"It's extraordinary," Schumacher said of the 2-year yield. "It's gapping. It can go almost anywhere. If you try to take a view right now, the vol [volatility] is just so high, you can't do it." The 10-year was at 3.39%.
He said fed funds futures briefly priced in as little as 9 basis points of a Fed rate hike for the central bank's meeting next week but futures were volatile and were pricing in about 12 basis points just after 9:30 a.m. ET. On Tuesday, the market pricing suggested investors mostly expected a quarter point hike, or 25 basis points.
"The ECB, which meets tomorrow is still priced for 32 basis points, which seems whacky," Schumacher said, referring to pricing in overnight index swaps.
The European Central Bank has been expected to raise rates by a half percent, but after worries swirled around Credit Suisse many traders expect a smaller hike of 25 basis points. A basis point equals 0.01 of a percentage point.
Credit Suisse shares open down more than 23% in heavy volume
Credit Suisse shares fell more than 23% in heavy volume as the market opened. Shares sank to a fresh all-time low of $1.75.
Troubles at the Swiss bank have reignited the turmoil among financial stocks, with pressure especially acute for mid-size U.S. banks. The bank's largest investor, Saudi National Bank, said it can't provide the company with further financial assistance.
—Christina Cheddar Berk
First Republic shares slide as Credit Suisse woes rattle sector
Shares of First Republic slid 15% on Wednesday as news that Credit Suisse's biggest backer wouldn't provide anymore financial support rattled the broader market.
First Republic and other regional bank stocks have been volatile in recent days as investors grapple with the fallout from the failure of Silicon Valley Bank.
Other regional bank stocks also fell Wednesday, including Western Alliance, last down about 4%.
— Samantha Subin
Stocks open lower
The three major indexes all traded lower as investors entered the new trading session.
The Dow was down 1.2%, while the Nasdaq Composite dipped 0.9% about 15 minutes after the market opened. The S&P 500 was down 1.2%, a drop that pulled the index's year-to-date gain within one percentage point of its flatline.
— Alex Harring