(Bloomberg) —
(Bloomberg) —
US stocks slid after the European Central Bank raised rates by 50 basis points as traders tried to read into the Federal Reserve’s next move.
The ECB raised its deposit rate to 3% from 2.5% while saying that inflation is projected to remain too high for too long. The central bank declined to provide color on future rate moves, according to a statement.
Signs of unrest persisted in the market as volatility gauges remained elevated and gains in US futures evaporated amid renewed selling of some regional-bank shares.
The S&P 500 and Nasdaq 100 slid. First Republic Bank plunged dragging down some of its regional peers, after saying it’s considering options including a sale. The Cboe Volatility Index edged up to 27, well above its long-term average of 20.
The euro was little changed, erasing early gains. Yields on the German 10-year rose around 3%.
European stocks erased an early advance and a rebound in bank stocks petered out, even as Credit Suisse jumped the most in history at the open after the embattled Swiss lender arranged to borrow as much as $54 billion from a Swiss National Bank liquidity facility. The shares pared gains as investors digested the implications.
European Central Bank Vice President Luis de Guindos told finance ministers Tuesday that some European banks could be vulnerable to rising interest rates, according to a Bloomberg report.
Treasuries yields slid with the two-year yield dropping to around 3.9% after historically steep declines in recent days. An index of the dollar briefly erased losses.
The banking-sector turmoil — which kicked off last week after the failure of Silicon Valley Bank and Signature Bank — has all but erased the S&P 500’s gains so far this year. All eyes are now on the Federal Reserve’s policy meeting next week, with traders debating whether the central bank will increase interest rates. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.
Data Thursday showed first-time unemployment claims dropped more than analysts’ estimates last week, while housing starts and building permits exceeded expectations, underscoring the economic resilience that’s allowed the Fed to tighten aggressively over the past year.
“Uncertainty is very high at the moment and there’s a lot of selling because of the shock from higher volatility and other factors,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The change in focus from inflation to growth concerns and financial stability has reversed the stock-bond correlation again. A stronger relief rally is not likely to happen before the Fed meeting.”
Crude fell more than 2% in New York trading. Oil stocks also dragged on the S& 500 benchmark.
Stocks
- The S&P 500 fell 0.4% as of 9:38 a.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 was little changed
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0586
- The British pound was little changed at $1.2052
- The Japanese yen rose 1.1% to 131.95 per dollar
Cryptocurrencies
- Bitcoin rose 1.7% to $24,811.3
- Ether was little changed at $1,653.8
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.41%
- Germany’s 10-year yield advanced three basis points to 2.16%
- Britain’s 10-year yield declined one basis point to 3.31%
Commodities
- West Texas Intermediate crude fell 1.7% to $66.49 a barrel
- Gold futures rose 0.3% to $1,936.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika, Sujata Rao, Sagarika Jaisinghani and Jan-Patrick Barnert.
(An earlier version of this story was corrected to show that Credit Suisse is seeking to buy back debt.)
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