It Was a Bad Day for Bank Stocks

Bank stocks tumbled Monday on worries about what’s next to break, following the second- and third-largest bank failures in US history. But many other stocks rose Monday on hopes the bloodletting will force the Federal Reserve to take it easier on the hikes to interest rates that are shaking Wall Street and the economy, the AP reports. The S&P 500 fell 5.83 points, or 0.2%, to 3,855.76 after clawing back most of an early drop of 1.4% . The Dow Jones Industrial Average fell 90.50 points, or 0.3%, to 31,819.14. The Nasdaq composite rose 49.96 points, or 0.4%, to 11,188.84. Treasury yields plunged as investors scrambled for safety and expectations built for the Fed to ease up on rate hikes.

The US government announced a plan late Sunday meant to shore up the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday. The most pressure is on the regional banks a couple steps below in size of the massive, "too-big-to-fail" banks that helped take down the economy in 2007 and 2008. Shares of First Republic Bank fell 61.8%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase. Huge banks, which have been repeatedly stress-tested by regulators following the 2008 financial crisis, weren't down as much. JPMorgan Chase fell 1.8%, and Bank of America dropped 5.8%.

"So far, it seems that the potential problem banks are few, and importantly do not extend to the so-called systemically important banks," analysts at ING said. The broader market flipped from losses to gains as expectations built that all the furor will mean the Fed won't reaccelerate its rate hikes, as it had been threatening to do. Such a move could give the economy and banking system more breathing space, but it could also give inflation more oxygen. Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding. The wider expectation, though, is that the Fed will likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

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