Highlights
Risk-off sentiment returned to drive stock prices broadly lower Friday with bank stocks under pressure again. The Dow Jones industrial average lost 1.2 percent, the S&P 500 declined 1.1 percent, and the NASDAQ slipped 0.7 percent. US Treasury yields dropped, the dollar rose, and oil prices fell.
Thursday's late recovery in bank stocks -- as sentiment improved after a consortium of big banks announced a cash infusion for beleaguered First Republic Bank -- gave way to renewed worries about First Republic, which ended down another whopping 33 percent. Bank stocks saw widespread losses and confidence in the banking system took another hit, with investors reacting poorly to news of huge bank borrowing at the Federal Reserve's emergency discount window.
Worst hit sectors, in addition to finance, were real estate, industrials, materials, and consumer discretionary. Technology and communications services, though weaker, outperformed the market. Megacaps held up relatively well as they are seen as less exposed to the banking sector.
The market is turning its focus to next week's Fed policy meeting. Expectations have crystallized on a 25 basis point rate move which would be the Fed's last in the current tightening cycle, given the expected negative impact on the real economy from the banking blowup.
Thursday's late recovery in bank stocks -- as sentiment improved after a consortium of big banks announced a cash infusion for beleaguered First Republic Bank -- gave way to renewed worries about First Republic, which ended down another whopping 33 percent. Bank stocks saw widespread losses and confidence in the banking system took another hit, with investors reacting poorly to news of huge bank borrowing at the Federal Reserve's emergency discount window.
Worst hit sectors, in addition to finance, were real estate, industrials, materials, and consumer discretionary. Technology and communications services, though weaker, outperformed the market. Megacaps held up relatively well as they are seen as less exposed to the banking sector.
The market is turning its focus to next week's Fed policy meeting. Expectations have crystallized on a 25 basis point rate move which would be the Fed's last in the current tightening cycle, given the expected negative impact on the real economy from the banking blowup.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
