Stocks fell steeply Tuesday as investors grew fearful that turmoil in the banking sector has not been contained, and ahead of a key policy decision from the Federal Reserve.
The Dow fell about 475 points, or 1.4% by midday Tuesday after tumbling nearly 600 points earlier in the session. The broad-based S&P 500 slid 1.4% and the tech-heavy Nasdaq slipped 1.2%. All three major indexes are on pace to end the week down.
Shares of PacWest Bancorp tumbled about 26.5%, paring back earlier losses. Western Alliance Bank fell about 20.4% and New York Community Bancorp declined about 7%. The SPDR S&P Regional Banking ETF, which tracks a range of mid-sized banks, dropped about 7%.
Big banks weren’t spared. Wells Fargo fell 4.7%, Citigroup slipped 3.1% and Bank of America declined 3.9%.
Shares of JPMorgan Chase dropped 1.7% after notching a 2.1% gain on Monday, following its purchase of most of collapsed regional lender First Republic Bank’s assets.
While CEO Jamie Dimon assured shareholders on a Monday call that the banking tumult has been contained, investors still appear to be skittish. Along with the upcoming Fed rate hike announcement due Wednesday afternoon, and fears about the debt ceiling, that’s creating a storm of worries on Wall Street, said Dan Eye, chief investment officer at Fort Pitt Capital Group.
Since investors are already expecting a quarter-point rate hike on Wednesday, Fed commentary will be the focus for markets, Eye said. Investors will be watching for clues about the state of credit conditions following three bank failures, as well as about the Fed’s planned trajectory for future rate hike decisions.
“The Fed really has to walk a tight rope tomorrow,” said Eye.