[New York Stock Market] Falling Close Amid Banking Sector Risks Ahead of FOMC... Nasdaq Down 0.74%

Trading Floor of the New York Stock Exchange, USA
Photo by Yonhap News

Major indices on the U.S. New York Stock Exchange closed lower as concerns over the banking sector persisted ahead of next week's Federal Open Market Committee (FOMC) regular meeting.

On the 17th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 384.57 points (1.19%) from the previous close to finish at 31,861.98. The S&P 500, which is centered on large-cap stocks, dropped 43.64 points (1.10%) to 3,916.64, while the tech-heavy Nasdaq index closed down 86.76 points (0.74%) at 11,630.51.

First Republic Bank's stock, which had rebounded the previous day with support from major banks, fell again by 32%. Since the closure of Silicon Valley Bank (SVB) on the 10th, First Republic has declined by more than 80%. Although First Republic received $30 billion in support from 11 major U.S. banks the day before, market anxiety intensified after the company announced after the market closed that it would suspend dividends.

SVB Financial, the parent company of SVB, filed for bankruptcy protection in a New York court on the same day. This came just a week after SVB was shut down. Immediately after the bankruptcy filing, SVB announced that it had received a delisting notice from Nasdaq.

Shares of Swiss bank Credit Suisse (CS) also fell 8% on the Swiss exchange that day. The company's credit default swap (CDS) premium is reaching an all-time high. CDS is a derivative product that allows investors to recover principal if the issuing country or company defaults on bonds.

Additionally, shares of Bank of America, Wells Fargo, and JP Morgan all dropped more than 3%.

Concerns over the banking sector ahead of the FOMC regular meeting scheduled for the 21st-22nd further heightened investors' risk-averse sentiment. The market expects the Federal Reserve (Fed) to raise the benchmark interest rate by 0.25 percentage points at this meeting, but worries that the SVB-related negative news could spread throughout the financial sector have increased, reducing the likelihood of a rate hike.

As preference for safe-haven assets grew, gold futures prices surpassed $1,970 per ounce, marking the highest level in 11 months. Meanwhile, crude oil prices based on West Texas Intermediate (WTI) fell to the $66 per barrel range, hitting the lowest level since December 2021.