Sentiment on the US500 worsened after media reports according to which European Central Bank officials are increasingly convinced that the eurozone banking system has survived the financial turmoil. This would allow the bank to resume interest rate hikes. Faith in the Fed's premature pivot appears to be waning. The stocks of major U.S banks are still under downward pressure, signaling that the mood in the financial industry remains tense.An overly hawkish Fed could potentially exacerbate stock declines in banking sector.
Given the significant weighting of financial companies in the S&P500, the benchmark's valuation is losing ground. Shares of First Republic Bank, which has been resuscitated for nearly a week, are losing more than 4%, erasing almost entirely yesterday's euphoric gains. Treasury Secretary Janet Yellen has indicated that the banking system is healthy and that US taxpayers will not bear the costs of failing banks however, this has failed to improve market sentiment. Major U.S. banks JP Morgan (JPM.US), Bank of America (BA.US), Wells Fargo (WFC.US), Citigroup (C.US) and US Bancorp (BAC.US) are still under pressure.
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US500 is erasing earlier gains before the Fed rate hike decision. Source: xStation5
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