- Stocks fell after comments from Treasury Secretary Janet Yellen rattled bank stocks and Federal Reserve Chairman Jerome Powell dashed hopes of a rate cut this year.
- Yellen's testimony to lawmakers, in which she stated that the government has no plans to expand deposit insurance, sent regional bank shares into a tailspin, weighing on broader indexes. Stocks initially rose after the Fed raised interest rates by a quarter percentage point, as expected. The market also lost ground after Powell stated that he is willing to keep raising interest rates until inflation begins to slow.
- The S&P 500 fell 1.7% in a broad-based selloff. All 22 stocks in the KBW Bank Index fell, with the index of US financial heavyweights falling nearly 5%. Two-year Treasury yields fell 24 basis points to around 3.9%. The dollar fell for the fifth consecutive day, its longest losing streak since April 2021.
- While the 25-basis-point increase was expected, the Fed changed its language on the future outlook to say that "some," rather than "ongoing," rate hikes are appropriate in the Fed's fight against inflation. The turmoil in the banking sector has raised the stakes for the decision, with traders lacking confidence in the central bank's plans for the first time since the tightening cycle began a year ago.
