Banking Stock Index. Concerns about the solvency of US regional banks are increasing, after the First Republic Bank failed. As a result, bank stocks slumped, to the point where the S&P 500 financial index almost fell below its 2007 high.
Of course, it will take a long time to recover from the crisis. To illustrate, after the credit crunch in 2008 it took more than a decade for the index to recover. Hedge fund manager and founder of Roppel Capital Management Jim Roppel said the financial sector index has been above its 2007 high since January 2021.
If the current index falls past this limit, it will be bad for the stock market because it can put pressure on banks to save capital, reduce lending, and provide additional burdens for economies at risk of recession, after the Fed’s rate hike. In discussing the stock market turmoil in banks, fears about the stability of the banking system have overshadowed investors.
Even though on Friday (5/6/2023) the overselling speculation ended because share prices had risen, many banking stocks still fell sharply. For example, Western Alliance Bancorp fell 27 percent and PacWest Bancorp fell 43 percent.
In the moment of stock decline, individual investors also buy these shares. In the week to Wednesday (3/5), they bought shares of Bank of America Corp., Truist Financial Corp., and SoFi Technologies Inc., according to data from Peng Cheng of JPMorgan Chase & Co.
Of course there is persistent concern on Wall Street that chaos among regional banks could tighten lending. Market participants expect the losses to be substantial, and predict the Fed will ease monetary policy as soon as July to stimulate the economy.
However, Nancy Tengler, chief investment officer at Laffer Tengler Investments, said it was too early to buy into the bank’s slump. Instead, he focused more on technology stocks and consumer-related stocks, which would benefit from lower interest rates.
Banking Stock Index On Friday (5/6) the stock market recovery was sparked by stronger-than-expected monthly employment data in April. Despite allaying fears of a recession, financial stocks in the index lost 2.7 percent over five sessions. Advisors Asset Management CEO Scott Colyer said that the S&P 500 index needs to drop to 3,600 or lower for him to be more optimistic about the stock. On Friday (5/6), the S&P 500 closed at 4,136.