By Frances Yue and Jamie Chisholm
U.S. stocks were sharply lower Wednesday morning as fresh concerns over the health of Credit Suisse sparked renewed banking-sector anxiety, while U.S. wholesale prices declined in February, hinting at easing U.S. inflation, and retail sales also fell for the month.
How stock indexes are trading
On Tuesday, the Dow Jones Industrial Average rose 336 points, or 1.06%, to 32,155, the S&P 500 increased 64 points, or 1.65%, to 3,919, and the Nasdaq Composite gained 239 points, or 2.14%, to 11,428.
What’s driving markets
Major stock indexes slid after data showed that sales at retailers fell 0.4% in February and declined for the third time in four months, pointing to a slowdown in consumer spending.
Still, the control-group retail-sales category, which is used as a proxy for calculating personal-consumption expenditures, rose 0.5% after a 2.3% increase in February, noted Eugenio Aleman, chief economist at Raymond James.
Consumer spending is weakening but still shows signs of resilience, according to Edward Moya, an analyst at Oanda.
Meanwhile, U.S. wholesale prices dropped 0.1% in February. Economists polled by the Wall Street Journal had forecast a rise of 0.3%.
See:Wholesale prices decline, PPI shows, and hint at easing U.S. inflation
The core producer-price index, which excludes volatile food, energy and trade prices, went up 0.2% in February.
“Despite today’s economic reports (Producer Prices and Retail Sales) printing lower-than-expected numbers, the declines in both releases are not broad-based, which supports our belief that the Federal Reserve (Fed) will raise rates by 25 basis points at the upcoming March meeting,” Aleman wrote in Wednesday note.
Markets expect the Fed to raise interest rates by 25 basis points to a range of 4.7% to 5% after its meeting on March 22. Just two days ago, traders were betting the Fed could leave rates unchanged in a week’s time in order to soothe anxiety in the banking sector.
What’s adding to the pressure is a Bloomberg report Wednesday that the biggest shareholder of Credit Suisse has ruled out investing any more funds in the beleaguered Swiss lender.
The news sparked a 16% plunge in Credit Suisse shares. Shares of U.S. regional banks, such as Zions Bancorp (ZION) and Pacific West Bancorp (PACW), were also under pressure.
“The banking rout has taken on another ominous twist … as fears rise to the surface about the robustness of sector with the shadow of the [Silicon Valley Bank] collapse still looming large,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“The market is being hypersensitive to the fact that poorly run banks are beginning to get punished and the sector is being pushed down by some banks that have poor management, not systemic risk,” said Dryden Pence, chief investment officer at Pence Capital Management.
Sharp movements in government yields pushed the ICE BofAML MOVE Index, a gauge of implied Treasury volatility, to a near 14-year high on Tuesday. A rising MOVE index has tended of late to pressure equities because the uncertainty in bonds makes it more difficult to value stocks.
Companies in focus
-Frances Yue
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03-15-23 1118ET
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