Dow, stocks plunge as Credit Suisse sparks fresh bank selloff

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, eclipsing bets on a smaller rate hike this month.

The Dow Jones Industrial Average plummeted 280.83 points, or 0.9%, to 31,874.57, the Nasdaq was down 0.1% and the S&P 500 slid 0.7%.

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

US-listed shares of Credit Suisse slid 24% to hit a record low, after the Swiss bank’s largest investor said it could not provide more financial assistance to the lender.

Fueling hopes of a less hawkish Fed policy, data showed retail sales fell 0.4% last month from a growth of 3.2% in January, while economists polled by Reuters had expected a contraction of 0.3%.

A separate report showed producer prices unexpectedly fell in February and the rise in prices in January was not as large as initially thought, offering some hopeful signs in the fight against inflation.

Traders now see equal chances of a 25-basis-point rate hike and a pause at the Fed’s March meeting. 

The data comes at a time when the collapse of SVB Financial and peer Signature Bank had already fanned fears about the health of other banks, fueling hopes that the Fed would steer clear of sharp rate hikes at its next meeting to ensure financial stability.

Yield on the 10-year Treasury notes fell to 3.47%, while that on the two-year note, which best reflects interest rate expectations, fell to 3.87% but was off session lows hit after the data.

Traders now see equal chances of a 25-basis-point rate hike and a pause at the Fed’s March meeting. 

While assurances and emergency measures by US authorities had helped regional banks stage a rebound in the previous session, the lenders nearly erased those gains in early trade.

Follow The Post’s coverage of Silicon Valley Bank’s collapse

First Republic Bank fell 2% while peer PacWest Bancorp slid 13%.

Big banks including JPMorgan Chase and Citigroup fell between 4% and 5%.

“Anything negative from any highly visible institution, in this case Credit Suisse, is going to have ripple effects across the financial sector,” said Michael James, managing director of equity trading at Wedbush Securities.

“Given all the turmoil with Silicon Valley Bank and Signature Bank, expectations have dramatically risen come that the Fed will keep rates unchanged, or maybe raise them (by) 25 basis points.”

Wall Street rallied in the previous session after a highly anticipated inflation report showed a slowdown in February consumer prices growth, spurring hopes of a smaller rate hike at the conclusion of the Federal Reserve’s meeting on March 22.

Shares of Charles Schwab rose 5.1%, a day after its chief executive said the firm has enough liquidity.