Stock markets fell on Wednesday as pressure on the financial sector increased with shares of Credit Suisse, the Swiss bank with large U.S. operations. and globally, fell almost 20%.
The Dow Jones Industrial Average fell 525 points, or 1.6%, while the Nasdaq Composite lost 1.4%. A 1.8% decline in the S&P 500 puts the index even more at risk.
In recent days, the crisis in the financial sector focused on regional banks as Silicon Valley Bank and Signature Bank collapsed. Both of these banks were victims of poor management in the face of eight interest rate hikes by the Federal Reserve in the past 12 months. Attention on Wednesday turned to the big banks with Credit Suisse shares hitting all-time lows.
The Saudi National Bank, Credit Suisse's largest investor, said on Wednesday it could not provide any further financing. This comes after the Swiss lender said earlier this week it had discovered "certain material weaknesses in internal controls over financial reporting" for 2021 and 2022.
Credit Suisse's U.S.-traded shares fell almost 26%. This has dragged down the European Bank sector and US bank stocks. Citigroup
and Wells Fargo dropped nearly 5% and 4%, respectively, while Goldman Sachs and Bank of America were down around 4% and 3%, respectively.
Regional banks, which rebounded on Tuesday to boost sentiment for the broader market, fell back into a worrying phase.
Peter Boockvar of Bleakley Financial Group says pressure on the financial sector is growing more broadly as bank failures have changed the way industry players operate.
Industry players now take a more cautious attitude in interacting with the financial issues that are happening.
