Stocks sink as bank shares fall, Fed meeting gets underway : Stock market news today

U.S. stocks fell on Tuesday as the Federal Reserve began its two-day meeting to determine its next move on interest rates in its battle against inflation.

The S&P 500 (^GSPC) fell by 1.08%, while the Dow Jones Industrial Average (^DJI) tumbled 1.09%. The technology-heavy Nasdaq Composite (^IXIC) dropped by 0.88% at 10:28 am ET.

Government bonds slumped after fresh data from the Labor Department showed that the labor market continues to cool off. The yield on the 10-year note was down to 3.46%, and two-year note yields fell to 4.02%.

The U.S. dollar index continued its strength, marching upward for the fourth straight day for what would be the first time since January.

The moves come after regulators took possession of First Republic Bank (FRC), resulting in the third failure of an American bank since the collapse of Silicon Valley Bank and Signature Bank in March.

It’s been a wild ride for First Republic, which teetered on the brink of failure for nearly two months. The regional lender last week revealed that deposit outflows totaled over $70 billion in the first quarter.

Regional bank shares continued to sell off with the S&P 500 regional banking index down 4%. The KBW banking index, another closely watched bank index, dropped over 4% on Tuesday. Shares of PacWest Bancorp (PACW) sank over 28%, while Western Alliance Bancorporation (WAL) plunged more than 24%.

The Federal Reserve is expected to raise rates by a quarter point. Investors’ main focus will be on whether Fed officials will give any hints on forward guidance.

Federal Reserve Board Chair Jerome Powell speaks during a news conference at the Federal Reserve, Wednesday, March 22, 2023, in Washington. (AP Photo/Alex Brandon)

Some market participants are placing bets that the central bank will maintain its hawkish tone and could signal a June hike. Others, like Morgan Stanley’s equity strategist Mike Wilson, expects the Fed to pause interest rate hikes and cuts through the end of the year, resulting in the federal funds rate remaining at a steady level of just over 5% for the foreseeable future.

“Should the…

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