© Reuters.
Investing.com -- The S&P 500 slumped Tuesday as a sea of red engulfed banking stocks amid fresh worries about the health of regional banks just as the Federal Reserve gets its two-day meeting underway.
The S&P 500 fell 1%, the Dow Jones Industrial Average fell 1%, or 353 points lower, and the Nasdaq slipped 0.9%.
Regional banks including PacWest Bancorp (NASDAQ:PACW) and Western Alliance Bancorporation (NYSE:WAL) tumbled sharply as worries about further stress in smaller lenders persist amid concerns that the backdrop of higher for longer interest rates will hurt banks exposed to long-duration assets including Treasuries and commercial loans.
While rising interest rates have strained many small and regional banks, Wells Fargo says it doesn’t anticipate a banking crisis as “the vulnerability to rising interest varies greatly across the banking industry.”
Energy was also a big drag on the broader market following a slump in oil as fears about the economy were exacerbated by fresh concerns the U.S. could default as early as June 1 if Congress doesn’t lift the debt ceiling.
Treasury Secretary Janet Yellen on Monday warned that the United States could run out of cash and default on its debt repayments as early as June 1.
“The president and top Democrats want a “clean” debt ceiling increase, while Republican leaders are demanding any increase be tied to a reduction in spending,” Stifel said in a note.
Halliburton Company (NYSE:HAL), APA Corporation (NASDAQ:APA) and Schlumberger NV (NYSE:SLB) were among the biggest decliners.
Consumer discretionary stocks were relative outperformers, underpinned by a more than 1% rise in Amazon (NASDAQ:AMZN) and a jump in Marriott International Inc (NASDAQ:MAR) after the latter’s quarterly results topped Wall Street estimates.
Uber (NYSE:UBER) jumped 11% after reporting a smaller-than-expected loss in the first quarter and delivering an upbeat outlook, with chief executive Dara Khosrowshahi saying it is “poised to expand profitability” in the second quarter.
Chegg (NYSE:CHGG) fell 50% after reporting better-than-expected quarterly results and warning that AI language program ChatGPT is threatening the health of its homework help business.
Cummins Inc (NYSE:CMI), meanwhile, fell 3% despite lifting its annual revenue outlook and reporting quarterly results that beat on both the top and bottom lines.
The sea of red on Wall Street comes just as the Federal Reserve gets its two-day meeting underway. The Fed is expected to hike rates by 0.25% on Wednesday, but its signaling on a potential pause will dominate investor attention.
In economic news, labor market demand cooled as job openings fell to a two-year low in March, easing worries about wage-led inflation.
