A series of stressors—most notably a massive devaluation of Credit Suisse stock—coincided on Wednesday to cause U.S. stocks to drop severely.
- The Dow Jones Industrial Average fell 399 points or 1.3%, the S&P 500 Index dropped 1.1%, and Nasdaq dropped 0.8%.
- The Bureau of Labor Statistics announced February’s CPI on Tuesday at 6%, coming in line with predictions but continuing to stress the Federal Reserve as it plans further interest rate hikes.
- The Commerce Department also reported a 0.4% decline in retail sales month-to-month.
- European bank Credit Suisse increased market tensions with a record 20.3% drop after a Tuesday report disclosed material weaknesses in the company’s reporting abilities, Yahoo Finance reports.
Why It’s News
Wednesday’s stock woes come on the heels of previous stressors negatively affecting financial markets. Friday saw the second-largest bank collapse in U.S. history with the destruction of Silicon Valley Bank in California, followed by a bailout by the Biden administration to prevent further crises from spreading to other banks after Signature Bank and Silvergate Bank already heavily suffered.
The financial industry has been vulnerable in the days since, although markets did rally Tuesday with good CPI news. The Dow has seen as much as a 4.2% decline since Thursday morning, before the collapse. The potential collapse of Credit Suisse only stands to intensify market fears.
With the Saudi National Bank telling Bloomberg that it would not increase its investment in Credit Suisse, the bank that was once aiming to become a leading global investment bank faced a crisis of confidence. It has faced multiple controversies and poor results in recent years and restructured its company in 2022 following massive layoffs.
Federal Financial Analytics managing partner Karen Petrou tells NPR that Credit Suisse may need to be rescued by the Swiss government to prevent further failures and that the bank’s global connections could have international economic effects. “If Credit Suisse were to fail, you would see significant problems. All sorts of exposures would come unglued.”