US stocks slump on central bank rate hike amid banking turmoil
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Traders work on the floor of the New York Stock Exchange, as US Federal Reserve chairman Jerome Powell delivers remarks onscreen.
PHOTO: REUTERS
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NEW YORK - Wall Street stocks tumbled into the red on Wednesday after the Federal Reserve unveiled a ninth straight interest rate hike despite worries surrounding the banking sector.
The US central bank raised the benchmark lending rate by a quarter-point, underscoring its determination to tackle stubborn inflation.
But policymakers are also trying to avoid further upheaval in the commercial banking sector, following the swift collapse of Silicon Valley Bank and fears of contagion.
The Dow Jones Industrial Average ended 1.6 per cent lower at 32,028.90, while the broad-based S&P 500 Index plunged 1.7 per cent to 3,936.82.
The tech-heavy Nasdaq Composite Index fell 1.6 per cent to 11,669.96.
Fed chairman Jerome Powell stressed in a press conference that the central bank is committed to learning the lessons from this episode of banking turmoil, while noting that financial conditions have tightened as well.
“The statement was dovish, but he did say that it’s hard to judge a recession,” said Mr Peter Cardillo of Spartan Capital.
Mr Powell also added that the Fed needs to strengthen supervision and regulation of banks.
“Anytime you put forward more regulation, it’s obviously a negative in terms of stocks,” Mr Cardillo said.
Regional banking shares slipped on Wednesday as well, with the troubled First Republic Bank ending 15.5 per cent lower.
PacWest Bancorp plummeted 17.1 per cent while KeyCorp lost 5.6 per cent. AFP
