On Friday, stocks experienced a decline as investors pulled back from positions in First Republic and other banks due to continued concerns about the state of the U.S. banking sector. First Republic’s stock slid nearly 33%, resulting in a weekly decline of almost 72%. This was a reversal from Thursday’s bounce, which occurred after a group of banks pledged to assist the First Republic with $30 billion in deposits.
The Dow Jones Industrial Average ended the day down 384.57 points, or 1.19%, closing at 31,861.98 points. The S&P 500 also slid by 1.10%, finishing at 3,916.64 points, while the Nasdaq Composite fell 0.74% to close at 11,630.51 points.
After receiving BNN news today from a group of banks on Thursday, First Republic saw a relief bounce, but on Friday, the bank’s stock took a nosedive, falling nearly 33% and ending the week down by approximately 72%.
The decline in First Republic’s stock
The decline in First Republic’s stock price had a ripple effect on the SPDR Regional Banking ETF (KRE), which fell 6% during Friday’s trading session and ended the week down 14%. The broader market also saw losses, with the Dow Jones Industrial Average falling 384.57 points, or 1.19%, to close at 31,861.98 points. The S&P 500 index dropped 1.10% to end at 3,916.64 points, while the Nasdaq Composite declined 0.74% to close at 11,630.51 points.
Traders scrutinized Credit Suisse’s announcement that it would borrow up to 50 billion francs, or almost $54 billion, from the Swiss National Bank, causing its U.S.-listed shares to close down almost 7%. The bank’s stock lost 24% throughout the week.
Although Friday’s session resulted in a decline, the S&P 500 index still rose 1.43% this week. Meanwhile, the Nasdaq Composite index climbed 4.41% as investors showed confidence in technology and other growth-oriented stocks before the upcoming Federal Reserve policy meeting. This week marked the Nasdaq’s best performance since January 13th. However, Friday’s decline caused the Dow to finish the week in negative territory, down by 0.15%.
The recent changes
In recent days, investors have closely monitored bank stocks, fearing that others may suffer the same fate as Silicon Valley Bank and Signature Bank, both of which were closed within the last week. The market has been reacting to the latest sector developments, with regulators announcing over the weekend that they would backstop deposits in the two banks.
“An expert said, “There is some anxiety about how this will all appear on Monday as we move into the weekend”. “Investors are jittery about holding onto stocks amid this uncertainty.” This turbulence in the stock market comes at a critical juncture as investors brace for the Federal Reserve’s upcoming meeting scheduled for March 21–22.
Market participants are anxiously awaiting to see if the central bank will proceed with a widely expected 25 basis point increase in interest rates despite the recent volatility in the banking sector.
“The Fed appears to be acknowledging the recent developments in the banking sector, but for now, the base case hasn’t changed,” Aoifinn Devitt shared with BNN news today, who serves as the Chief Investment Officer at Moneta. “The banking sector’s recent events have caused contagion in terms of sentiment, but not yet in terms of other banks.”