US Regional Bank Stocks Drop Amid Credit Concerns and Fraud Allegations
US regional bank shares declined sharply due to concerns over credit risks following recent fraud disclosures, highlighting vulnerabilities in the banking sector.
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Bank Shares
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German Bank Shares Plummet as U.S. Commercial Real Estate Faces Dire Warning
Shares of Deutsche Pfandbriefbank, a German lender, dropped by as much as 14% after issuing a profit warning due to the struggling commercial real estate market in the U.S. The bank cited persistent weakness in the market and increased risk provisions. It now expects pretax profits for the year to be significantly lower than previously forecasted. Other banks, such as ABN Amro, also experienced declines in their shares. European stock markets were relatively stable, with slight movements, while U.S. stock futures were mixed.
Market Volatility Continues as Interest-Rate Concerns Mount and Nasdaq Experiences Unusual Activity
The Dow Jones and S&P 500 closed slightly lower as concerns over higher US interest rates persisted, causing bank shares to slip. The Nasdaq ended slightly higher. The financial sector was the biggest drag on the S&P 500, with an S&P downgrade of credit ratings for regional US lenders weighing on bank shares. Investors are looking for clarity on the rate outlook from Fed Chair Jerome Powell's speech on Friday. The benchmark 10-year Treasury yield reached nearly 16-year highs, indicating expectations of prolonged higher rates. Chip heavyweight Nvidia's results and forecast are eagerly awaited. Department stores, including Macy's, Kohl's, and Nordstrom, saw significant declines.
Debt Ceiling Talks Impact Stock Markets Globally
Stock futures are up, indicating a potential recovery after Tuesday's fall due to concerns about a debt-ceiling default. Regional bank shares are volatile, with PacWest Bancorp and Western Alliance Bancorp leading gains. Housing starts for April rose 2.2%, beating expectations, but building permits fell 1.5%. The 10-year US Treasury yield fell to 3.534%, while the two-year yield rose to 4.095%. The WSJ Dollar Index gained 0.4%, and the Stoxx Europe 600 fell 0.1%.
The Controversy Surrounding Short Selling in Bank Shares.
Federal prosecutors in Washington are investigating short seller activity around the recent volatility in U.S. bank shares sparked by the failure of three regional lenders since March. The Justice Department is looking for potential securities market manipulation, and other regulators are also assessing potential market manipulation by short sellers. Short sellers have profited from the banking crisis, reaping $1.2 billion in paper profits during the first two days of May, according to data from analytics firm Ortex.
The Controversy of Short Selling in Bank Shares.
U.S. federal prosecutors in Washington are investigating short seller activity around the recent volatility in U.S. bank shares, sparked by the failure of three regional lenders since March, for potential securities market manipulation. Other regulators are also assessing potential market manipulation by short sellers. Short sellers have profited from the banking crisis, reaping $1.2 billion in paper profits during the first two days of May, according to data from analytics firm Ortex.
Yellen's Comments on Deposit Guarantee Cause Bank Shares to Slide
Bank shares fell after US Treasury Secretary Janet Yellen suggested that a blanket deposit guarantee was unnecessary, stating that the US has a strong financial regulatory system in place. Yellen's comments were made in response to a question about the potential for a digital dollar and its impact on financial stability. The market reacted negatively to her comments, with bank shares sliding.