Wall Street on Friday closed lower, marking the end of a tumultuous week dominated by an unfolding crisis in the banking sector and the gathering storm clouds of possible recession.
All three major indices ended the session deep in negative territory, with financial stocks down the most among the major sectors of the S&P 500.
For the week, while the benchmark S&P 500 and the NASDAQ closed higher than their previous Friday results, up 1.43 percent and 4.41 percent respectively, the Dow Jones Industrial Average posted a weekly decline of 0.15 percent.
SVB Financial Group announced it would seek Chapter 11 bankruptcy protection, the latest development in an ongoing drama that began last week with the collapse of Silicon Valley Bank and Signature Bank, which sparked fears of contagion throughout the global banking system.
The sell-off “is a bit of an overreaction,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “However, there is validity to some of the concerns regarding overall liquidity and a potential liquidity crunch.”
Those concerns have spread to Europe, as Credit Suisse Group AG shares stumbled over liquidity worries, prompting policymakers to scramble to reassure markets.
Photo: AFP
“This goes a lot further than just a run on SVB or First Republic, it goes to the real impact these interest rate hikes are having on capital and balance sheets,” Pursche said. “And you’re seeing it impact large institutions like Credit Suisse, and that’s got people rattled.”
Over the past two weeks, the S&P Banking Index and the KBW NASDAQ Regional Banking Index plunged by 4.6 percent and 5.4 percent respectively, their largest two-week drops since March 2020.
First Republic Bank plummeted 32.8 percent after the bank announced it was suspending its dividend, reversing Thursday’s surge, which was sparked by an unprecedented US$30 billion rescue package from large financial institutions
Among First Republic’s peers, PacWest Bancorp fell 19 percent, while Western Alliance slid 15.1 percent.
US-traded shares of Credit Suisse also closed sharply lower, down 6.9 percent.
Investors now turn their gaze to the US Federal Reserve’s two-day monetary policy meeting next week.
In view of recent developments in the banking sector and data suggesting a softening economy, investors have adjusted their expectations regarding the size and duration of the Fed’s restrictive interest rate hikes.
“This mini banking crisis has increased the chance of recession and accelerated the slowdown timeline for the economy,” Pursche said. “It’s natural that the Fed should re-examine its course of action, but it’s still very clear that while inflation is slowing, it’s still very much a concern and needs to be brought under control.”
At last glance, financial markets have priced in a 60.5 percent likelihood that the central bank will raise its key target rate by 25 basis points, and a 39.5 percent probability that it will let the current rate stand, CME Group Inc’s FedWatch tool showed.
The Dow Jones fell 384.57 points, or 1.19 percent, to 31,861.98, the S&P 500 lost 43.64 points, or 1.10 percent, to 3,916.64 and the NASDAQ Composite dropped 86.76 points, or 0.74 percent, to 11,630.51.
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
United Microelectronics Corp (UMC, 聯電) expects its addressable market to grow by a low single-digit percentage this year, lower than the overall foundry industry’s 15 percent expansion and the global semiconductor industry’s 10 percent growth, the contract chipmaker said yesterday after reporting the worst profit in four-and-a-half years in the fourth quarter of last year. Growth would be fueled by demand for artificial intelligence (AI) servers, a moderate recovery in consumer electronics and an increase in semiconductor content, UMC said. “UMC’s goal is to outgrow our addressable market while maintaining our structural profitability,” UMC copresident Jason Wang (王石) told an online earnings
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said
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