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US Stocks Continue Decline Amid Regional Bank Contagion Concerns with Non-Farm Payroll Report in Focus


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

On Thursday, the Dow Jones Industrial Average fell 0.86%, the S&P 500 slid 0.72%, and the Nasdaq Composite shed 0.49%, marking the fourth consecutive day of declines for the major indexes. The decline was caused by contagion fears in the regional bank space as PacWest’s shares tanked over 50% due to news that the California bank has been assessing strategic options, including a possible sale. The SPDR S&P Regional Bank ETF (KRE) dropped more than 5%, while Western Alliance tumbled 38% and Zions Bancorporation lost 12%.

The Federal Reserve’s 25 basis point rate hike and commentary following its Wednesday meeting were also being digested by investors. Keith Apton, managing director at UBS Wealth Management, believes that the volatility in the banking sector will help the Fed’s mission of cooling down the economy. Apton believes that regional lenders will have to constrain capital, which will indirectly cool down the economy and bring inflation down. Additionally, he does not believe that the Fed will have to raise rates any further for the rest of this year, although Friday’s nonfarm payrolls report will be important to watch.

Overall, the decline in the major indexes was due to contagion fears in the regional bank space and investors digesting the Federal Reserve’s rate hike and commentary.

Data by Bloomberg

On Thursday, the US stock market fell by 0.72%, with sectors experiencing varying degrees of decline. The financial industry saw the most significant drop at 1.29%, followed by communication services at 1.26%, and energy and industrials both declined by over 1%. Real estate and utilities were the only sectors that saw gains, with real estate up 0.92% and utilities up 0.73%. Consumer staples saw a small decline of 0.29%, while information technology, materials, consumer discretionary, and health care all declined between 0.49% to 0.81%.

Major Pair Movement

Data by VT Markets MT4

On Thursday, the dollar index remained unchanged, but it gained against the euro and lost to the yen due to increasing banking and recession concerns. Market uncertainty surrounding central bank tightening combined with worries about economic and financial stability were reflected in the decreasing inversion of Treasury and euro zone yield curves. The falling German exports and retail sales and unhealthy US Q1 productivity and labor costs raised further concerns.

The implosion of US regional bank stocks could lead to a rate decline and risk-driven USD/JPY, pushing it back toward the banking crisis lows of April and March. A full percentage point of Fed rate cuts is being priced in by year-end, while the ECB is only expected to hike 28bp.

On Friday, the focus will be on US employment data, but concerns over banking stress will continue to be in the spotlight.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CHFConsumer Price Index14:300.2%
CADEmployment Change20:3021.6K
CADUnemployment Rate20:305.1%
USDAverage Hourly Earnings m/m20:300.3%
USDUnemployment Rate20:30181K
USDNon-Farm Employment Change20:303.6%