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Market Snapshot: Dow down 350 points as fears of banking contagion weighs on markets

U.S. stocks traded lower again on Thursday, with the market headed for its biggest weekly selloff since March, after the Federal Reserve raised interest rates Wednesday while regional bank stocks came under pressure again.

How are stocks trading
  • The S&P 500 SPX, -0.78% fell by 38 points, or 0.9%, to 4,053.
  • The Dow Jones Industrial Average DJIA, -1.17% declined by 360 points, or 1.1%, to 33,053.
  • The Nasdaq Composite COMP, -0.39% fell by 92 points, or 0.8%, to 11,933.

On Wednesday, the Dow Jones Industrial Average fell 270 points, or 0.8%. The blue-chip gauge is on track to fall 2.6% this week.

What’s driving markets

U.S. stocks fell again with financials leading the way down after the Federal Reserve raised interest rates on Wednesday for the tenth time though Chairman Jerome Powell hinted at a pause in rate hikes.

U.S. stocks are headed for their worst week since March 10, the day Silicon Valley Bank collapsed, as investors fear the Federal Reserve might be powerless to ease pressure on the banking sector by cutting rates, said Michael Lebowitz, portfolio manager at RIA Advisors.

“The Fed is stuck, if this would have happened prior to Covid and inflation wasn’t an issue, the Fed would be talking about cutting rates or slowing down on QT or stopping it. But right now, they have an inflation problem to deal with,” Lebowitz said.

The financial services sector was the worst performing in the S&P 500 index Thursday.

Just hours after Fed Chair Jay Powell said that the banking sector was “sound and resilient” during Wednesday’s press conference, shares in PacWest Bancorp PACW, -48.44% plunged 50% in after-hours trading amid reports the struggling regional bank’s executives were weighing a possible sale.

“It looks like more trouble is brewing for the U.S. banking sector, on the contrary to what Powell said yesterday,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

See: Bank stocks drop again as PacWest freefall ‘feeds that narrative’ of weakness despite a ‘fundamentally sound’ businesses

Meanwhile, the European Central Bank delivered its latest policy decision, hiking rates by 25 basis points, while ECB President Christine Lagarde hinted at more hikes to come.

See: Lagarde says ECB ‘not pausing’ after delivering rate hike

Economic data released on Thursday showed the number of Americans who applied for unemployment benefits rose by 13,000 to 242,000 during the final week of April. Meanwhile, the trade deficit narrowed 9% in March to a four-month low of $64.2 billion.

Results from Apple AAPL, the largest U.S. company by market capitalization, are due after the closing bell on Thursday.

Companies in focus

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