Dow Plunges 500 Points As More Bank Stocks Crash

Despite trading close to flat Tuesday morning, the Dow Jones Industrial Average plunged deep into negative territory as the day progressed, falling 540 points, or 1.6%, to 33,514 by 11:40 a.m. ET, while the S&P 500 and tech-heavy Nasdaq slipped 1.7% and 1.4%, respectively.

A slew of regional bank stocks headed up the market plunge, with Pacwest Bancorp cratering 39%, Western Alliance 21% and Metropolitan Bank 19%—volatility that triggered multiple trading halts throughout the day and pushed the Regional Bank Sector ETF down to its lowest level since October 2020.

“The nature of this particular dive feels different than was the case in March [when Signature Bank abruptly collapsed and Silicon Valley Bank failed],” Vital Knowledge founder Adam Crisafulli wrote in a Tuesday email, explaining investors were at the time scrutinizing losses in bond portfolios, whereas they’re now anxious about the broader regional bank sector in general.

With funding costs rising and interest income past its peak, banks are more likely to face losses in the coming months—putting regional banks at a disadvantage given that investors fear many of them “are like stodgy brick-and-mortar retailers focused on selling non-perishable commodity products at the advent of the Amazon and online commerce era,” adds Crisafulli.

The fallout comes just one day after JPMorgan chief Jamie Dimon sought to quell concerns about the banking industry, saying the system is “very stable” but still warning: “You will see other cracks in the system.”