The Dow Jones Industrial Averagefell 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 500dropped 0.7% to 3,891.93. The Nasdaq Compositeeked 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 Suisseclosed 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. Citigroupslid 5.4%, while Wells Fargoand Goldman Sachseach lost more than 3%. The Financial Select Sector SPDR Fund (XLF)lost 2.7%.
“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.”
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