Wall Street points to losses to end a tumultuous week

Wall Street fell early Friday as a shaky banking sector remained in focus in the US and abroad.

Dow Jones Industrials futures fell 0.8% and S&P futures fell 0.7%.

Despite a tumultuous week of wild swings spurred by the failure of the two US banks, markets may still end the week higher.

Over the past few days, the markets’ focus has turned to Switzerland’s Credit Suisse and San Francisco’s First Republic Bank.

First Republic fell 24% in premarket Friday, wiping out gains triggered Thursday after a group of 11 major banks offered a $30 billion lifeline to the latest troubled US lender. First Republic rose 10% Thursday after falling as much as 36% early in the day.

The S&P 500 jumped 1.8% on Thursday, erasing earlier losses, following reports that First Republic Bank could get bailed out or sell itself to another bank. Markets have been abuzz this week on worries about the strain on banks from the fastest rate hikes in decades. The turmoil flared up with last week’s collapse of Silicon Valley Bankthe second largest bank failure in American history.

“The market remains cautious; dealers don’t want to get overexcited, especially with investors still focusing on what could go wrong rather than what could go right,” Stephen Innes of SPI Asset Management said in a report.

Credit Suisse shares fell about 7% on the Swiss stock market on Friday, a day after the Swiss central bank agreed to lend the bank up to 50 billion francs. (US$54 billion) to strengthen its economy. Like First Republic, shares in Switzerland’s second-biggest lender have been on a tear: they rose as much as 33% on Thursday after falling almost as much the day before when the bank’s largest shareholder said it would not invest any more money.

Silicon Valley Bank’s parent filed for Chapter 11 bankruptcy protection Friday, a week after its collapse. Since SVB’s failure, investors have been looking for banks with similar characteristics, such as many depositors with more than the $250,000 limit insured by the Federal Deposit Insurance Corp., tech startups and other highly connected individuals who can diffuse concerns about a bank’s strength quickly.

The Federal Reserve’s fastest barrage of rate hikes in decades, designed to drive down inflation, has shocked the banking system after years of historically easy conditions. Higher interest rates increase the risk of recession and damage the prices of stocks, bonds and other investments. The latter factor hurt Silicon Valley Bank as high interest rates forced down the value of its bond investments.

Treasury yields fell again on Friday, with the 2-year falling to 4.07% from Thursday’s 4.17%. Last week, the 2-year interest rate was above 5%. The yield on the 10-year fell to 3.46% from 3.58% a day earlier. That return was over 4% last week.

US Treasury Secretary Janet Yellen told a Senate committee Thursday that the nation’s banking system “remains healthy” and Americans “can feel safe” about their deposits.

Wall Street is increasingly expecting this week’s turmoil to push the Federal Reserve to raise interest rates next week by just a quarter of a percentage point. That would be the same increase as last month and half the 0.50 point increase that was expected earlier.

The European Central Bank raised its key interest rate by half a percentage point on Thursday, shrugging off speculation that it may cut the rate amid all the turmoil surrounding banks.

All the stress in the banking system has raised concerns about a potential recession because of how important small and medium-sized banks are to providing loans to businesses across the country. Oil prices have fallen this week on those fears.

Bitcoin has been rising all week on the potential that the US Federal Reserve will pause its string of interest rate hikes. It continued to climb higher on Friday, gaining 8% in early trade and surpassing $27,000 each. It is up more than 35% this week.

Markets in Europe fell sharply at midday, with Germany’s DAX down 0.8% and the CAC 40 in Paris down 1%. In London, the FTSE 100 fell 0.7 per cent.

In Asia, Hong Kong’s Hang Seng jumped 1.8% to 19,548.26 and the Shanghai Composite rose 0.7% to 3,450.55.

Tokyo’s Nikkei 225 index rose 1.2% to 27,333.79 and the Kospi in Seoul rose 0.8% to 2,395.69. Shares in Japan’s major banks rose after falling sharply at times this week.

Australia’s S&P/ASX 200 added 0.4% to 6,994.80. India’s Sensex was 0.1% higher, while Taiwan’s Taiex rose 1.5%.

In other trading, benchmark U.S. crude oil retreated $1.02 to $67.33 a barrel in electronic trading on the New York Mercantile Exchange. It rose 74 cents Thursday to $68.35 a share. barrel.

Brent crude, the benchmark for international trade, lost $1.18 to $73.52 a barrel. barrel.

The dollar fell to 132.70 Japanese yen from 133.76 yen. The euro rose to $1.0632 from $1.0611.


Kurtenbach reported from Bangkok; Ott reported from Silver Spring, Md.

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