(Reuters)

United States (US) stocks dropped today (March 15) as turbulence at Credit Suisse renewed fears of a banking crisis, while data hinting at economic weakness kept alive hopes of a less aggressive monetary policy move by the Federal Reserve in March.

US-listed shares of Credit Suisse slid 24.3 per cent to hit a record low, after the Swiss bank’s largest investor said it could not provide more financial assistance to the lender.

Fuelling hopes of a less hawkish Fed policy, data showed retail sales fell 0.4 per cent last month from a growth of 3.2 per cent in January, while economists polled by Reuters had expected a contraction of 0.3 per cent.

FEARS FANNED

A separate report showed US producer prices unexpectedly fell in February and the rise in prices in January was not as large as initially thought, offering some hopeful signs in the fight against inflation.

The data comes at a time when the collapse of SVB Financial and peer Signature Bank had already fanned fears about the health of other banks, fuelling hopes that the Fed would steer clear of sharp rate hikes at its next meeting to ensure financial stability.

Yield on the 10-year Treasury notes fell to 3.47 per cent, while that on the two-year note, which best reflects interest rate expectations, fell to 3.87 per cent but was off session lows hit after the data.

Traders now see equal chances of a 25-basis-point rate hike and a pause at the Fed’s March meeting.

While assurances and emergency measures by US authorities had helped regional banks stage a rebound in the previous session, the lenders nearly erased those gains in early trade.

First Republic Bank fell 13.1 per cent while peers Western Alliance Bancorp and PacWest Bancorp slid 7.1 per cent and 18.4 per cent, respectively, before trading in their shares was halted for volatility.

Big US banks including JPMorgan Chase & Co, Citigroup and Bank of America Corp fell between five per cent and one per cent.

The KBW regional banking index slid 3.8 per cent while the S&P 500 banking index dropped 4.2 per cent.

“Anything negative from any highly visible institution, in this case Credit Suisse, is going to have ripple effects across the financial sector,” said Michael James, managing director of equity trading at Wedbush Securities.

“Given all the turmoil with Silicon Valley Bank and Signature Bank, expectations have dramatically risen come that the Fed will keep rates unchanged, or maybe raise them (by) 25 basis points.”

Wall Street rallied in the previous session after a highly anticipated inflation report showed a slowdown in February consumer prices growth, spurring hopes of a smaller rate hike at the conclusion of the Federal Reserve’s meeting on March 22.

CHARLES SCHWAB SHARES FALL DAY AFTER DECLARATION FIRM HAS ENOUGH LIQUIDITY

At 9:47 am ET, the Dow Jones Industrial Average was down 417.25 points, or 1.30 per cent, at 31,738.15, the S&P 500 was down 48.11 points, or 1.23 per cent, at 3,871.18, and the Nasdaq Composite was down 104.12 points, or 0.91 per cent, at 11,324.03.

Shares of Charles Schwab Corp fell 1.9 per cent, a day after its chief executive said the firm has enough liquidity.

Declining issues outnumbered advancers for a 6.10-to-1 ratio on the NYSE and for a 3.71-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 31 new lows, while the Nasdaq recorded 5 new highs and 203 new lows.