Bank Stocks Alert: Why Are PACW, WAL, BAC, ZION, Down Today?

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  • Regional bank stocks are under pressure again on Tuesday as the SPDR S&P Regional Banking ETF (KRE) hits new 52-week lows.
  • First Republic Bank failed over the weekend, marking the third major U.S. bank failure this year.
  • The action comes a day ahead of the Federal Reserve’s plan to raise interest rates by another 25 basis points.
Bank stocks - Bank Stocks Alert: Why Are PACW, WAL, BAC, ZION, Down Today?

We all knew the market had a full plate this week, but bank stocks were not expected to be in the spotlight. At least, not quite this much. That’s even after the recent failure of First Republic Bank. Instead, it was supposed to be other events.

The Federal Reserve’s two-day meeting begins today (and concludes on Wednesday) as the Fed’s expected to raise interest rates once again. In fact, the market was pricing in a ~93% likelihood the Fed would raise rates by 25 basis points. A day later, those odds sit at 85%.

Other events on the docket? Apple (NASDAQ:AAPL) reports earnings on Thursday after the close, and the monthly jobs report will be released on Friday morning.

However, those events seem lightyears away, as the focus remains squarely on the Fed and on regional banks.

Stocks like PacWest (NASDAQ:PACW), Western Alliance Bancorporation (NYSE:WAL), Zions Bancorporation (NASDAQ:ZION) and others are getting hammered. Specifically, this trio is down 25%, 17% and 12% on the day so far, respectively.

The SPDR S&P Regional Banking ETF (NYSEARCA:KRE) is making new 52-week lows as a result. The spillover in the regional banks is obviously weighing on investor sentiment. It doesn’t help that the Fed is forecast to raise rates again this week, putting even more pressure on many of these names.

Will Bank Stocks Cripple the Rally?

So far, the Big Banks like JPMorgan Chase (NYSE:JPM) have been able to step in and pick up the pieces from these banks, while the FDIC has been able to insure depositors. Still, to see three notable U.S. bank failures so far this year is raising an alarm bell.

In March, Silicon Valley Bank and Signature Bank both failed, but investors chalked it up to poor management. That’s certainly true, but it does ignore some clear underlying issues.

The entire sector is trading poorly, and at some point, that presents a risk to the broader market. For investors who think these are no-name bank stocks and present little risk, consider:

“Monday’s shutdown marks the nation’s second-largest bank failure — First Republic Bank had nearly $230 billion in assets last month — eclipsing the Silicon Valley Bank collapse. Three of the four largest bank failures in U.S. history have taken place over the last two months.”

The reason for today’s action is not immediately clear, as there were not any imminent concerns at the start of trading. The KRE ETF did not do anything of significance in the pre-market session. Further, it opened lower by just 0.30%. At last glance, it was down almost 7%.

The fact that it comes just a day ahead of the Fed’s announcement is a bit concerning. At the very least, investors should keep an eye on the regional bank stocks, even if they aren’t trading them.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2023/05/bank-stocks-alert-why-are-pacw-wal-bac-zion-down-today/.

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