The Stock Market Tumbles At The End Of A Volatile Week

Stocks were on track to lose additional ground at the close of a turbulent week. A drop in Deutsche Bank shares adds to concerns about the viability of banks.

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Shortly after the market began, the Dow Jones Industrial Average fell 233 points or 0.8%. The S& P 500 was down 0.7%, while the tech-heavy Nasdaq Composite was down 0.8%.

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Indices are attempting to hold onto their weekly advances. The Dow was up 0.1% on the week as of this morning, while the S&P 500 and Nasdaq were up 0.2% and 0.8%, respectively.

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Investors have endured another week of bank-related news. On Friday, shares of Deutsche Bank (ticker: DB) in Germany fell 7%. The cost of insuring Deutsche Bank against failure has risen, putting the bank in the limelight.

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Trade Algo reported that Treasury Secretary Janet Yellen would attend a previously unscheduled meeting of the Financial Stability Oversight Council on Friday to ease bank worries.

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"Traders' concerns about the stability of the European banking system have returned," says Naeem Aslam, Chief Investment Officer at Zaye Capital Markets. "Last week,

The forced purchase of Credit Suisse by UBS provided some respite for European banking stocks, but that comfort has rapidly disappeared as the risk of a new crisis has surfaced."

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Tom Essaye, the founder of Sevens Report Research, adds that money flows indicate a risk-off stance from traders, noting that Treasury rates have fallen dramatically in response to global banking concerns.

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"Bottom line, banks have reemerged as the key impact on markets in the second part of the week, and if the sector's weakness continues today, equities will have a very difficult time extending yesterday's tiny comeback," he says.

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Investors are particularly interested in the condition of inflation and the health of the US economy since interest rate projections for the future remain unknown.

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The St. Louis Fed shared a presentation given by President James Bullard at a Greater St. Louis Inc. meeting on Friday. Bullard stated that statistics on the real economy "were stronger than projected during the first quarter of 2023, and inflation remained too high."

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"Continued adequate macroprudential policy can minimize financial stress, while suitable monetary policy can keep inflation under control," Bullard noted.

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According to IHS Markit's Preliminary U.S. Manufacturing Purchasing Managers Index, manufacturing activity is contracting at a slower rate than in February. In March, the index was 49.3, up from 47.3 in February. Economists predicted a score of 47.2.

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Investors were also thinking about the Federal Reserve, which boosted interest rates by a quarter-point on Wednesday. Rising interest rates have caused banks to report huge, albeit unrealized, losses on their asset portfolios, shaking trust in the industry and ushering in the worst bank collapse since the 2008-09 financial crisis.

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While Fed Chairman Jerome Powell and Yellen have both taken steps to calm markets and depositors this week, the mood remained risk-averse through the end of the week as bank concerns became more worldwide.

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"Markets [in the United States] are still trying to figure out the entire impact of the banking crisis, as well as what tighter monetary conditions mean for future profitability," according to Sophie Lund-Yates, an analyst at broker Hargreaves Lansdown.

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