US stocks closed lower on Tuesday, with regional banking stocks experiencing another day of plummeting values in anticipation of a possible rate hike from the Federal Reserve. The Fed is expected to increase its benchmark lending rate on Wednesday in an effort to control inflation through interest rate hikes.
The Dow Jones Industrial Average closed 1.1% lower at 33,684.46, while the S&P 500 and Nasdaq Composite Index both fell 1.2% and 1.1%, respectively. Crude oil futures also declined more than 5% due to concerns about regional banking.
Fear and worry have dominated Wall Street as the market reacts to the failure of First Republic Bank on Monday. Despite some analysts predicting the worst might be over for regional banks, Tuesday marked another painful day for midsize banks. The KBW Nasdaq Regional Banking Index ended the day down over 5.5%.
PacWest, a Los Angeles-based bank, saw its share price fall almost 28%, while Phoenix-based Western Alliance slid over 15%. Metropolitan Bank in New York also saw a drop in its share price by more than 20%.
Although it may seem like doom and gloom for regional banks, it is possible that the broader US stock market could recover. According to Adam Sarhan, the CEO of 50 Park Investments, financial markets tend to move in a "big direction" before an interest rate decision. Sarhan suggests that the market is trying to put pressure on the Fed to cut rates.
As the Fed looks to tackle high inflation through interest rate hikes, the market will continue to react to the potential impact on regional banks and the broader US stock market.
