The fear index hit its biggest daily rise in nearly two months. In turn, the main indices fell while the shares of the PacWest Bancorp bank lost 27.8% and those of Comerica fell 12.4%.
Lhe US stock markets closed sharply lower on Tuesday and shares of regional banks plummeted amid renewed fears about the health of the financial system, as investors tried to gauge how much longer could the Federal Reserve raise interest rates.
According to preliminary data, the S&P 500 lost 48.82 points, or 1.2%, to 4,119.05, while the Nasdaq Composite was down 132.49 points, or 1.1%, at 12,077.29. The Industrial Average Dow Jones fell 365.40 points, or 1.1%, to 33,680.41.
The Fed is expected to raise rates 25 basis points on Wednesdayand investors are eager for any signal from the central bank on whether it will be the last hike for now, or if more is possible if inflation remains high.
The KBW regional banking index reached its lowest intraday level since the end of 2020. Shares in the energy sector fell along with oil prices on investor concerns over a possible US debt default.
Treasury Secretary Janet Yellen said the federal government may not be able to meet all its payment obligations as of June 1 without legislation raising Washington’s borrowing limit. The S&P 500 energy sector fell the most of all major sectors, followed by the S&P financials.
US regional banks deepened their losses on Monday after the seizure and auction of First Republic Bank. Most of its assets were acquired by JPMorgan Chase & Co in a transaction negotiated by the Federal Deposit Insurance Corporation. Two other US regional banks had gone under in March.
Quincy Krosby, chief global strategist at LPL Financial, said that “worries that this is not over and that rates continue to rise, which could be a catalyst for more trouble”.
“The VIX volatility index rose due to the uncertainty derived from the publication of the decision on the interest rate that the Federal Reserve will take tomorrow”Nino Di Russo, director of OnLineTradingCollege.org, explained to ANSA.
Finally, the Fed will announce an interest rate decision on Wednesday afternoonand then President Jerome Powell will answer questions from journalists at a press conference.
Source: Ambito
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