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Wall Street closed sharply lower on Tuesday as the regional banking crisis deepened. The possibility of a U.S. debt default raised concerns about the state of the economy, and oil prices sank. All three major indexes ended firmly in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1.1% or 367.17 points to close at 33,684.53. Twenty-seven components of the 30-stock index ended in negative territory, while three ended in positive.
The S&P 500 dropped 1.2% or 48.29 points to close at 4,119.58. Ten of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF) and the Communication Services Select Sector SPDR (XLC) dropped 4.4%, 2.3% and 1.9%, respectively, while the Consumer Discretionary Select Sector SPDR (XLY) advanced 0.1%.
The tech-heavy Nasdaq lost 132.09 points, or 1.1%, to finish at 12,080.51.
The fear-gauge CBOE Volatility Index (VIX) was up 10.6% at 17.78. A total of 12.3 billion shares were traded on Tuesday, higher than the last 20-session average of 10.4 billion. Decliners outnumbered advancers on the NYSE by a 3.55-to-1 ratio. On the Nasdaq, a 2.46-to-1 ratio favored declining issues.
Regional Banks Continue to Slide
The regional banking crisis continued to weigh in on the market for the second consecutive session, as investors became increasingly concerned about the health of the segment and its impact on trade. The fall of First Republic Bank and eventual sale to JPMorgan Chase & Co. (JPM - Free Report) over the weekend is being seen as a reboot to the crisis, and expectations are that many more regional banks will start to show steep deposit outflows.
The SPDR S&P Regional Banking ETF (KRE - Free Report) more than doubled its losses from the previous session, falling 6.3%. Regional banks being exposed to the commercial real estate sector, especially in office buildings with high vacancy rates, have facilitated investor concerns about losses piling up and adding fuel to the current crisis amid rising interest rates. With the Fed expected to announce a 25 bps hike on Wednesday, things are not looking rosy for the sector.
U.S. in Debt Default Territory
Treasury Secretary Janet Yellen informed Congress on Monday that the government is on the verge of a catastrophic debt default by as early as Jun 1 unless lawmakers decide to raise the debt ceiling. In the political negotiations that followed, leaders of both pre-eminent parties hardened their standoff over the $31.4 trillion debt ceiling.
This cast a pall on the market, and investors rushed to a risk-off stance, leading to a broad sell-off. The traders’ eyes will be fixated on the political solution to this economic problem for the next few days because a government in debt default could spell massive trouble for the already volatile economy.
Oil Prices Slump to a 5-Week Low
Oil prices fell about 5% to a five-week low and became the biggest drag on the market amid rising concerns about the economy as U.S. politicians discussed how to avoid a debt default and another interest rate hike looks certain.
Brent crude fell $3.99, or 5%, to settle at $75.32/barrel, while WTI crude slid $4.00, or 5.3%, to end at $71.66.
The U.S. Census Bureau announced that factory orders in March had increased by 0.9%, while the February number has been revised to a decline of 1.1% instead of the decline of 0.7% reported previously.
Per the JOLTS report, job openings fell for the third consecutive month in March, and layoffs hit the highest level in more than two years. Job openings, were down 384,000 to 9.59 million on the last day of March, the lowest level since April 2021. Data for February was revised higher to 9.97 million instead of the 9.93 million reported earlier.
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Stock Market News for May 3, 2023
Wall Street closed sharply lower on Tuesday as the regional banking crisis deepened. The possibility of a U.S. debt default raised concerns about the state of the economy, and oil prices sank. All three major indexes ended firmly in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1.1% or 367.17 points to close at 33,684.53. Twenty-seven components of the 30-stock index ended in negative territory, while three ended in positive.
The S&P 500 dropped 1.2% or 48.29 points to close at 4,119.58. Ten of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF) and the Communication Services Select Sector SPDR (XLC) dropped 4.4%, 2.3% and 1.9%, respectively, while the Consumer Discretionary Select Sector SPDR (XLY) advanced 0.1%.
The tech-heavy Nasdaq lost 132.09 points, or 1.1%, to finish at 12,080.51.
The fear-gauge CBOE Volatility Index (VIX) was up 10.6% at 17.78. A total of 12.3 billion shares were traded on Tuesday, higher than the last 20-session average of 10.4 billion. Decliners outnumbered advancers on the NYSE by a 3.55-to-1 ratio. On the Nasdaq, a 2.46-to-1 ratio favored declining issues.
Regional Banks Continue to Slide
The regional banking crisis continued to weigh in on the market for the second consecutive session, as investors became increasingly concerned about the health of the segment and its impact on trade. The fall of First Republic Bank and eventual sale to JPMorgan Chase & Co. (JPM - Free Report) over the weekend is being seen as a reboot to the crisis, and expectations are that many more regional banks will start to show steep deposit outflows.
The SPDR S&P Regional Banking ETF (KRE - Free Report) more than doubled its losses from the previous session, falling 6.3%. Regional banks being exposed to the commercial real estate sector, especially in office buildings with high vacancy rates, have facilitated investor concerns about losses piling up and adding fuel to the current crisis amid rising interest rates. With the Fed expected to announce a 25 bps hike on Wednesday, things are not looking rosy for the sector.
U.S. in Debt Default Territory
Treasury Secretary Janet Yellen informed Congress on Monday that the government is on the verge of a catastrophic debt default by as early as Jun 1 unless lawmakers decide to raise the debt ceiling. In the political negotiations that followed, leaders of both pre-eminent parties hardened their standoff over the $31.4 trillion debt ceiling.
This cast a pall on the market, and investors rushed to a risk-off stance, leading to a broad sell-off. The traders’ eyes will be fixated on the political solution to this economic problem for the next few days because a government in debt default could spell massive trouble for the already volatile economy.
Oil Prices Slump to a 5-Week Low
Oil prices fell about 5% to a five-week low and became the biggest drag on the market amid rising concerns about the economy as U.S. politicians discussed how to avoid a debt default and another interest rate hike looks certain.
Brent crude fell $3.99, or 5%, to settle at $75.32/barrel, while WTI crude slid $4.00, or 5.3%, to end at $71.66.
Consequently, shares of Chevron Corporation (CVX - Free Report) and ConocoPhillips (COP - Free Report) fell 4.3% and 3.8%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The U.S. Census Bureau announced that factory orders in March had increased by 0.9%, while the February number has been revised to a decline of 1.1% instead of the decline of 0.7% reported previously.
Per the JOLTS report, job openings fell for the third consecutive month in March, and layoffs hit the highest level in more than two years. Job openings, were down 384,000 to 9.59 million on the last day of March, the lowest level since April 2021. Data for February was revised higher to 9.97 million instead of the 9.93 million reported earlier.