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Wall Street falls as Credit Suisse issues new bank sales

  • Feb retail sales, producer inflation falls
  • Credit Suisse US shares hit record lows
  • Regional bank stocks fall

NEW YORK, March 15 (Reuters) – U.S. stocks pared losses late on Wednesday, but the Dow and S&P 500 still closed lower, as problems at Credit Suisse revived fears of a banking crisis and overshadowed bids for a smaller U.S. rate hike this month.

Benchmarks regained some ground in late trade after Bloomberg reported that the Swiss government was holding talks on options to stabilize the country’s banking giant. The Nasdaq composite ended with small gains.

“We’re seeing movement in the headlines, but not severe headlines, which is good … I don’t think we’re in the 2008-2009 stages by any means when it comes to contagion,” said Themis Trading co-head of trading Joe Saluzzi.

Still, Credit Suisse problems have put more pressure on the banking sector after U.S. authorities eased investors with emergency measures to prevent contagion following the collapse of SVB Financial ( SIVB.O ) and Signature Bank ( SBNY.O ).

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Some investors believe aggressive US rate hikes by the Federal Reserve caused cracks in the financial system.

“They’ve been tightening at the steepest, most dramatic rate we’ve seen since 1980, and so I think this could be the opportunity for them to take a break,” said Cresset Capital CIO Jack Ablin.

US-listed shares in Credit Suisse hit a record low after its biggest investor said it could not provide more funding to the bank, starting a slide in European lenders and squeezing US banks as well.

The selling put an early end to Wall Street’s tepid rally in yesterday’s session.

“Yesterday’s pullback in financial stocks, the banks, made sense, but kind of the overriding factor here is a loss of confidence and there’s really a fear of the unknown,” said Adams Fund CEO and senior portfolio manager Mark Stoeckle.

Data showed US retail sales fell 0.4% last month after growing 3.2% in January. Economists polled by Reuters had expected a decline of 0.3 percent.

A separate report showed US producer prices fell unexpectedly in February, a day after another reading showed moderation in consumer inflation. This fueled investors’ hopes that the Fed may slow its rate hikes.

US Treasury yields fell, and traders now expect equal chances for a 25 basis point rate hike and a pause at the Fed’s March meeting.

The Dow Jones Industrial Average (.DJI) fell 280.83 points, or 0.87%, to 31,874.57, the S&P 500 (.SPX) lost 27.36 points, or 0.70%, to 3,891.93 and The Nasdaq Composite added (.IXIC) points (.IXIC) 0.05% to 11,434.05.

First Republic Bank ( FRC.N ) fell 21.37% while PacWest Bancorp PACW.O plunged 12.87% and trading was halted several times due to volatility, a day after shares of the battered banks posted a strong recovery.

Shares of Western Alliance Bancorp ( WAL.N ) and bank and brokerage Charles Schwab Corp ( SCHW.N ) bucked the trend to close up 8.3% and 5%, respectively. Both stocks reversed early declines.

“In the financial markets, you just have to look at those who can get by and don’t have that much investment risk on their portfolio,” said Jeffrey Carbone, managing partner at Cornerstone Wealth.

Major U.S. banks including JPMorgan Chase & Co ( JPM.N ), Citigroup ( CN ) and Bank of America Corp ( BAC.N ) fell, pushing the S&P 500 banking index (.SPXBK) down 3.62%. The KBW Regional Bank Index (.KRX) fell 1.57%.

Most of the 11 major S&P 500 sectors were in the red, with energy (.SPNY) the worst performer, down 5.42%.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 3.34 to 1; on the Nasdaq, a 2.33 to 1 ratio favored decliners.

S&P 500 posted 3 new 52-week highs and 37 new lows; The Nasdaq Composite recorded 17 new highs and 379 new lows.

Reporting by David Carnevali; Editing by David Gregorio

Our standards: Thomson Reuters Trust Principles.

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