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Thursday March 16, 2023

Today's newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with the .

Credit Suisse (CS) just suffered its worst day on record — sending the stock plummeting 22%. The bank's bonds are also crashing, and investors are paying for insurance on its bonds at rates not seen since the Global Financial Crisis.

As investors call into question the solvency of one of Europe's biggest banks, the safety and soundness of the entire global banking system is once again a big question mark for Wall Street. Meanwhile in the U.S., investors are still coming to grips with the fallout from the failures of Silicon Valley Bank and Signature Bank, sending regional bank stocks down for the seventh time in eight sessions.

The once-difficult job now facing Federal Reserve chair Jay Powell and his central banker colleagues just became a seemingly impossible dilemma — continue its fight against inflation by raising rates and tightening credit markets even further, or battle a new banking crisis that poses systemic risk.

It's worth remembering that only last week, Fed chair Jay Powell sat in front of Congress and said the Federal Reserve was "prepared to increase the pace of rate hikes." He hedged the statement (as a conservative central banker should), citing the need to consider the "totality of incoming data."

But the bond market took notice that day, and so did bank stocks. Suddenly, markets were pricing in a 50 basis points (0.5 ppt) March rate hike instead of 25 bps. The U.S. 13-week Treasury-bill yield (^IRX) jumped the most in two months — topping 4.8% for the first time since 2007. Meanwhile, the S&P 500 Select Financial SPDR ETF (XLF) had its worst day in nearly six months, settling at a six-week low.