Dow plunges 500 points and S&P cuts First Republic to junk status in wake of SVB collapse

-> Wall Street’s main stock indexes dropped on Wednesday on fresh fears
-> Worries related to Credit Suisse spurred fears of further banking crisis
-> The Big Four trillion-dollar US banks bled away yesterday’s gains in early trading

Keith Griffith and James Reynolds — Daily Mail.com March 15, 2023

Plunging bank stocks drove Wall Street lower on Wednesday, as turmoil at Credit Suisse renewed fears of a banking crisis following the collapse of Silicon Valley Bank.

The S&P 500 Banks Industry Group Index dropped more than 4 percent in afternoon trading, and the Dow Jones Industrial Average fell 524 points, or 1.63 percent.

In Europe, shares of Credit Suisse plunged as much as 30 percent, hitting a new record low for the second day in a row, after the troubled Swiss bank’s biggest investor refused to offer further financial assistance.

Treasury Department officials are actively reviewing the US financial sector’s exposure to Credit Suisse, working closely with the Federal Reserve and European regulators, sources told Bloomberg.

Shares of First Republic, one of the US regional banks swept up in contagion fears after the collapse of Silicon Valley Bank last week, dropped up to 23 percent after Standard & Poors downgraded the bank’s bond rating to Junk status.

The Big Four trillion-dollar US banks gave back their gains from yesterday’s rally, with shares of JPMorgan, Bank of America, Citigroup and Wells Fargo down between 3 percent and 6.1 percent in midday trading.

Driving the turmoil on Wall Street were concerns about Credit Suisse, after the $1.6 trillion Swiss bank’s largest investor ruled out further financial assistance to the lender.

As its share price plunged, Credit Suisse asked the Swiss National Bank and regulatory agency Finma to issue public statements expressing confidence in the bank’s financial health, according to a Financial Times report citing sources familiar with the matter.

A spokesperson for Credit Suisse declined to comment when reached by DailyMail.com on Wednesday afternoon. The Swiss central bank and Finma could not be immediately reached for comment.

Concerns about Credit Suisse’s stability rocked European markets, and the European Central Bank (ECB) contacted banks on its watch to quiz them about their exposures to the Swiss banking giant, two supervisory sources told Reuters.

Asked about the impact of Credit Suisse’s problems on the US banking system, Senator Bernie Sanders told Reuters: ‘Everybody is concerned.’

Meanwhile, BlackRock CEO Larry Fink in his annual letter to investors and CEOs warned the US regional banking sector remains at risk after the collapse of Silicon Valley Bank, predicting inflation will persist and rates would continue to rise.

Fink called the Fed’s rapid rate hikes over the past year the ‘first domino to drop’ after years of easy money, noting that ‘prior tightening cycles have often led to spectacular financial flameouts’ and citing the ‘slow rolling crisis’ of the Savings and Loan Crisis of the 1980s.

‘We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the US regional banking sector (akin to the S&L Crisis) with more seizures and shutdowns coming,’ he wrote.

Billionaire financier Carl Ichan also voiced concerns in a CNBC interview on Tuesday, saying ‘our system is breaking down, and we absolutely have a major problem in our economy today.’

‘One of the major reasons is that you don’t have good corporate leadership,’ said Ichan.

He continued: ‘When the tide is high, and things are great, it doesn’t matter, and all these guys that are running these companies are partying and having a good time and giving themselves bonuses. But, you know, their incentive is different than the people who invest with them.’

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