US regional banks stumble as stock markets retreat
Stocks across the US fell sharply on Tuesday, led by regional lenders and a broad selloff tied to the ongoing banking sector turmoil. PacWest stock traded down as much as 28%, Metropolitan Bank dropped about 20%, and Western Alliance fell roughly 15%. The KRE exchange-traded fund, which tracks regional banks, declined 6.27% on its worst day since the March crisis. The broader market followed, with the Dow Jones Industrial Average slipping around 1.08% on the day.
Analysts linked the pressure to the first Republic Bank situation, which earlier faced a government intervention and partial sale to JPMorgan Chase. Market participants noted a persistent wave of selling as investors weigh lenders with high exposure to commercial real estate and other stressed assets. The collapse of First Republic marks the third regional bank failure in as many months, following Silicon Valley Bank and Signature Bank in March. The latest episode saw deposits retreat by more than $100 billion amid the broader banking crisis, unsettling sentiment more widely in financial markets.
Meanwhile, the financial sector as a whole faced pressure in Tuesday’s session, with the sector index showing a modest gain of about 2.3% on the day. JPMorgan Chase declined about 1.60%. While regional lenders were among the worst performers, investors still view the sector as vulnerable to ongoing banking system risks.
Downbeat closes for Dow and Nasdaq
At the close in New York, the Dow finished near 33,684.53, the S&P 500 slipped about 1.16% to 4,119.58, and the Nasdaq Composite fell roughly 1.08% to 12,080.51. Energy shares bore the brunt of the losses as Texas light sweet crude touched a new slide, with WTI down about 4.28% and trading near $71.66 a barrel, extending a multi-day decline. The oil market has been pressured by soft Chinese manufacturing data that signal weaker demand from the world’s top crude importer, and traders anticipate further policy moves from the Federal Reserve as a meeting approaches.
These declines come ahead of the Federal Reserve’s policy meeting, with expectations that interest rates could rise again by a quarter of a percentage point. Oil majors led the losses among the Dow components, with several energy names posting the steepest drops. Only a handful of stocks triumphed, including MSD, Johnson & Johnson, and McDonald’s, which posted small gains.
First Republic Bank acquisition
JPMorgan Chase emerged as the buyer of First Republic at a government auction held on Monday, following weeks of attempted bailouts involving major Wall Street firms and U.S. authorities. Bloomberg News and other outlets reported that JPMorgan was among four finalists in a tight final round, with bids submitted late Sunday night. JPMorgan did not learn of its victory until late morning in New York, even as bids were being placed just hours before the decision, a moment that tested the nerves of executives awaiting news.
The final deal, announced around 3:30 a.m., has elevated Jamie Dimon’s profile as a leading banker on Wall Street while also sparking questions about the risks of owning banks that are deemed too big to fail. The arrangement raises ongoing concerns about regulatory oversight and the Biden administration’s approach to maintaining stability without unduly shielding large institutions from market pressures, according to industry observers.
Analysts from Piper Sandler noted that the JPMorgan acquisition is strategically significant for the bank, strengthening its position as a leader in a turbulent environment. They cautioned that some risks remain, including political scrutiny around the idea of institutions being too large to fail, which could influence future regulatory and market dynamics.