US stocks slump on Fed's rate hike amid banking crisis
Federal Reserve extends its year-long fight against high inflation by raising its key interest rate by a quarter-point despite concerns that higher borrowing rates could worsen turmoil that has gripped America's banking system.
Traders react as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen, on the floor of the New York Stock Exchange (NYSE) in New York City, US, March 22, 2023.
Wall Street stocks have tumbled into the red after the US 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 on Wednesday, 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 percent lower at 32,028.90 while the broad-based S&P 500 Index plunged 1.7 percent to 3,936.82.
The tech-heavy Nasdaq Composite Index fell 1.6 percent to 11,669.96.
Fed Chair 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.
READ MORE: US Fed lifts key interest rate; Powell assures banking woes not widespread
US Federal Reserve increases interest rates for the ninth time in a row, signalling another increase to come pic.twitter.com/oIWH2J7Gic
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Dovish statement
"The statement was dovish, but he did say that it's hard to judge a recession," said Peter Cardillo of Spartan Capital.
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," Cardillo said.
Regional banking shares slipped on Wednesday as well, with the troubled First Republic Bank ending 15.5 percent lower.
PacWest Bancorp plummeted 17.1 percent while KeyCorp lost 5.6 percent.
READ MORE: Central banks boost global dollar liquidity after Credit Suisse rescue
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