Bank stocks dip; Fedmay relax rate hikes

NEW YORK — Bank stocks tumbled Monday on worries about what’s next to break, following the second- and thirdlargest bank failures in U.S. history.

But many other stocks rose on hopes the bloodletting will force the FederalReserve to take it easier on the hikes to interest rates that are shaking Wall Street and the economy.

The S&P 500 dipped 0.2 percent after whipsaw trading, where it careened from an early loss of 1.4 percent to a midday gain of nearly that much.

The Dow Jones Industrial Average fell 90 points, or 0.3 percent, while theNasdaq composite rose 0.4 percent.

The sharpest drops again came from banks and other financial companies.

Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system.

The U.S. government announced a plan late Sundaymeant to shore up confidence in the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

Themost pressure is on the regional banks a couple steps below in size of the massive, “too-big-tofail” banks that helped take down the economy in 2007 and 2008.

Shares of FirstRepublic Bank fell 61.8 percent, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

“So far, it seems that the potential problem banks are few, and importantly do not extend to the socalled systemically important banks,” analysts at ING said.

The broader market flipped from losses to gains as expectations built that all the furor will mean the Fed won’t reaccelerate its rate increases, as it had been threatening to do.

Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding.

Rate cuts often act like steroids for the stockmarket.

The wider expectation, though, is that the Fedwill likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

That would still be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed could go back to increasing rate hikes.

Prices for Treasurys shot higher as investors sought safety and as their expectations grew for an easier Fed.

All told, the S&P 500 slipped 5.83 points to 3,855.76. The Dow fell 90.50 to 31,819.14, and the Nasdaq rose 49.96 to 11,188.84.