Stocks slump as regional banks tank: Stock market news today

Stocks slumped Thursday afternoon as markets digested the latest interest rate hike from the Federal Reserve and more pressure on the regional banking sector ahead of a highly anticipated earnings release from Apple (AAPL).

The S&P 500 (^GSPC) fell 0.72%, while the Dow Jones Industrial Average (^DJI) lost nearly 300 points, or 0.86%. The technology-heavy Nasdaq Composite (^IXIC) was down 0.49%.

Shares of regional bank PacWest (PACW) tumbled 50.62% Thursday afternoon after Bloomberg reported it was considering strategic options including a sale. The bank said in a statement that it “will continue to evaluate all options to maximize shareholder value.”

Other regional banks followed PacWest lower. Western Alliance (WAL) closed down 38.52% as the Financial Times reported Western Alliance is exploring a potential sale. Western Alliance in a statement called the report “categorically false in all respects,” adding that the bank is “not exploring a sale, nor has it hired an advisor to explore strategic options.”

Meanwhile, Zions (ZION) fell 12% as the reports weighed on the sector. The KBW regional bank index (KRX) closes down 3.51%.

“You’re kind of walking on egg shells if you’re a bank management team, where you don’t necessarily want to come out and take some help from other banks because it may signal there’s problems under the hood with your own bank,” Wedbush managing director David Chiaverini told Yahoo Finance Live.

The moves came a day after Federal Reserve Chair Jerome Powell said JPMorgan’s purchase of First Republic on Monday was “an important step toward drawing a line under that period of severe stress.” The stock declines underscore a disconnect between gloomy investor sentiment surrounding regional banks and the optimism that the crisis is over expressed by big names in Washington and on Wall Street.

On Wednesday, Powell and the Fed raised interest rates to their highest levels since 2007, continuing an aggressive rate hike path that has contributed to the credit stress in the financial system. In his subsequent press conference, Powell’s remarks indicated what some economists described as a “hawkish pause,” likely in June.

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“Should regional bank stress stabilize, labor markets stay tight, and inflation stay elevated, a rate hike in June could become appropriate,” BofA U.S. Economist Michael Gapen wrote in a note Wednesday.

Shares of First Horizon (FHN) also slumped 33.5% at the open, its largest drop since September 2008, as Toronto Dominion Bank (TD) and First Horizon called off their potential merger due to regulatory hurdles.

More corporate earnings are set to flow in on Thursday. Fifty-one S&P 500 companies, accounting for 12% of the index’s market cap, are scheduled to report earnings, per Evercore ISI.

Paramount Global (PARA) stock sank roughly 28.35% as the company reported weaker-than-expected quarterly results and announced a dividend cut. The company reported a direct-to-consumer loss of $511 million in the first quarter compared to a loss of $456 million in the prior year period.

Peloton (PTON) shares also traded lower, falling 13.48% as the company warned of revenue and subscription declines next quarter.

Meanwhile, Shopify (SHOP) stock rose 23.9% after selling its logistics business to Flexport and announcing workforce reductions of 20%.

Apple, Block (SQ), Coinbase (COIN), DraftKings (DKNG), and Lyft (LYFT) are set to report after the market close.

Oil futures were just under 1% higher on Thursday after falling nearly 10% over the last five days. West Texas Intermediate (CL=F) and Brent (BZ=F) traded near the flat line. Brent Crude prices sat just over $72 a barrel.

On the economic front, weekly initial jobless claims exceeded expectations. The report said 242,000 jobless claims were filed, an increase of 12,000 from the week prior. Economists surveyed by Bloomberg had been expecting 240,000 claims. The April Jobs report is expected to provide a further look at the labor market on Friday.

Economists surveyed by Bloomberg project 185,000 nonfarm payroll jobs were added to the US economy last month with the unemployment rate ticking slightly higher to 3.6%. In March, the U.S. economy added 236,000 jobs while the unemployment rate fell.

Josh is a reporter for Yahoo Finance.

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