Wall Street Tumbles with Specter of Regional Banking Crisis in the US
Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, US, January 3, 2017. REUTERS/Lucas Jackson
The Dow Jones Industrial Average fell 0.65% to 45,952.24 points, while the S&P 500 lost 0.63% to close at 6,629.07 points. The technology-rich Nasdaq Composite fell 0.47% to 22,562.54 points.
Wall Street is grappling with the onset of a regional banking crisis in the US and closed lower on Thursday, fueled by renewed concerns about the credit quality of US regional banks.
Investors also grappled with ongoing trade tensions and the impact of the partial federal government shutdown.
The biggest pressure came from regional banks, especially Zions and Western Alliance, which hit daily lows as major indexes reversed. Zions fell 13% after taking a $50 million impairment charge on defaulted loans to two clients, while Western Alliance lost 11% after disclosing an alleged case of fraud by a client.
"The market is extremely nervous about credit-related losses," analysts say. The regional banks' problems have not been well received, and this is punishing financial institutions and small-cap banks.
JPMorgan CEO Jamie Dimon himself warned earlier this week that "when you see one cockroach, there are probably more," referring to the collapses of First Brands and Tricolor Holdings. Investment bank Jefferies, with exposure to First Brands, lost another 10% this Thursday, registering a monthly drop of 25%.
Investors were also paying close attention to geopolitical developments, on a day when Donald Trump spoke for two hours on the phone with Vladimir Putin, having scheduled a future meeting in Budapest to try to end the conflict between Russia and Ukraine.
Tomorrow, Trump will host Zelensky, and the world will be watching the Ukrainian president's reaction to the possibility of a peace process with Russia, when in reality, what he was hoping for was the Tomahawk Land Attack Missile (TLAM) to continue the war until he could defeat Russia. Putin's admission of willingness to pursue a peace process weakens the argument of "pressuring Putin to sit at the negotiating table" that was being used to request the missiles.
The US-China trade war could also ease with the possibility of a peace agreement brokered by Donald Trump between Russia and Ukraine.
WTI oil falls 1.39% to $57.46. Below the $61.01 price of Brent in Europe, which fell 1.45%.
The euro appreciates 0.03% to $1.1690.
jornaleconomico
