Wall Street finishes in red after top Fed official discussed banking stress


All three major indexes on Wall Street finished in the red on Tuesday after a top Federal Reserve official addressed the recent banking crisis.

The Dow Jones Industrial Average concluded the trading session at 32,394.25, losing 37.83 points or 0.12 percent. The S&P 500, which tracks the performance of the top 500 U.S. companies, finished at 3,971.27, declining by 6.26 points or 0.16 percent. The Nasdaq Composite closed at 11,716.08, losing 52.76 points or 0.45 percent.

The tech sector was one of the biggest weights within the S&P 500, with the S&P 500 technology index posting a 0.50 percent on Tuesday and extending its decline this week. The sub-index, however, remained on track to post sharp growth this quarter.

Apple shares went down 0.40 percent to $157.65, while Microsoft plunged 0.42 percent to $275.23. Electric automaker Tesla also posted a sharp decline of 1.37 percent.

"It's a little bit of a follow-through from yesterday's pullback in tech stocks. You're seeing a little bit of profit-taking," Michael James, managing director of equity trading at wealth manager Wedbush Securities, said.

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"Some of the enthusiasm is waning a little bit."

Michael James, Managing Director of Equity Trading at Wedbush Securities

Meanwhile, analysts said financial authorities had managed to restore some of the market confidence in the banking sector, especially after facilitating the purchase of the defunct Silicon Valley Bank (SVB) by First Citizens. Analysts, however, predicted that the market would remain wary of the sector in the near future.

The KBW regional banking index, which reflects the performance of U.S. regional lenders and thrifts, fell by 0.2 percent. James explained that the prospect of more stringent banking regulations on small to mid-size lenders had raised the "anxiety level for those that are perceived currently to be struggling."

Michael Barr, Federal Reserve's vice chair for supervision, said banking authorities would review a 2018 law that weakened the 2010 Dodd-Frank law to see its contribution to the recent banking stress. Per the more recent law, lenders with assets between $100 billion to $250 billion — around the size of SVB — do not need to maintain sufficient liquidity to cover 30 days of deposit withdrawals.

Barr also discussed the collapse of SVB, saying the Santa Clara-based regional lender had failed to take the appropriate risk management measures. A large portion of SVB assets were Treasury notes and bonds, which decreased significantly in value as the Fed raised interest rates.

Investors are now anticipating the results of U.S. banks this quarter, which are expected to give more details about the health of the sector after the collapse of SVB and peer Signature Bank.

Dollar, crypto updates

After the result on Wall Street, the U.S. dollar struggled in Asia, with the dollar index trading mostly flat earlier in the day. The index previously lost around 0.3 percent in two consecutive sessions.

The greenback strengthened over the Japanese yen by 0.59 percent at one point during the day before eventually falling slightly. Analysts, however, explained that the approaching end of Japan's fiscal year might have something to do with the weakening yen.

Usually, the yen will weaken the greenback when U.S. Treasury yields rise, like what happened on Tuesday. Experts described the move as uncharacteristic of the yen.

In the crypto market, Bitcoin price improved, rising by around three percent in the evening to trade around the $28,300 mark. The token slid to $26,955.61 the day before after the Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance for allegedly breaking trading rules.

Crypto experts predict a strong rally by Bitcoin in the coming months to the point of reaching a new all-time high. It is possible if the dollar does not outperform the cryptocurrency sector. Last year, digital currencies lost most of their value due to a strong dollar rally.