Dow falls over 300 points on debt ceiling worries and dreary Home Depot outlook
Stocks fell Tuesday, dropping steeply in the hour leading up to the close as investors grew increasingly worried about the economy's health.
The Dow Jones Industrial Average and the S&P 500 are on pace to end the week down. The Nasdaq Composite is on pace to rise for the week.
President Joe Biden is meeting with congressional leaders this afternoon on the debt ceiling limit. Republican Speaker Kevin McCarthy said Tuesday that stricter work requirements for some government aid programs are a "red line" in negotiations — a provision Biden sounded guardedly open to on Sunday.
Biden is cancelling part of his upcoming travel to Papua New Guinea and Australia amid the debt ceiling discussions, a source familiar tells CNN.
Meanwhile, shares of Home Depot fell 2.2%, dragging down the stock market as the retail bellwether's disappointing outlook stoked fears about the economy's health.
Crude prices also fell on the uncertain economic outlook. West Texas Intermediate crude, the US benchmark, declined to roughly $71 a barrel.
Investors also digested the Senate Banking Committee's interrogation of former leaders at collapsed lenders Silicon Valley Bank and Signature Bank on Tuesday. The former executives were grilled on their conduct, their response to the banks' failures and their multimillion-dollar compensation during their tenures.
Regional bank shares fell after rallying earlier in the day. PacWest shares fell 14.6%, New York Community Bank declined about 1.3% and KeyCorp fell 2.3%.
Lawmakers continue their probe into America's financial system on Wednesday at 2:30 p.m. ET, in an Economic Policy Subcommittee hearing chaired by Democratic Senator Elizabeth Warren on "strengthening accountability" at the Federal Reserve.
Tesla shares rose 0.1% ahead of the electric vehicle maker's annual shareholders meeting on Tuesday at 4 pm ET.
The Dow fell 336 points, or about 1%.
The S&P 500 declined 0.6%.
The Nasdaq Composite rose 0.2%.
As stocks settle after the trading day, levels might still change slightly.
House hearing on banks underscores divided appetite for tighter regulation
Democratic and Republican representatives on the House Financial Services Committee sparred over banking regulation at a hearing on Tuesday.
Tougher restrictions, namely higher capital and liquidity requirements, were front and center during the hearing at whichFedVice Chair for Supervision Michael Barr testified.
Barr oversaw theFed’s autopsy report on Silicon Valley Bank’s failure. Per the report's findings, Barr told lawmakers “there are weaknesses and regulation and supervision that should be addressed.”
Tougher capital and liquidity requirements could have strengthened SVB, but they may not have prevented it from failing, Barr said in the report.
Several Republicans on the Committee said the findings of the report don’t justify imposing tougher regulations on banks. Many, including Republican Rep. French Hill, warned it would “make it harder to have a broad-based, diverse [banking] system.”
While Democratic lawmakers tried to illustrate how rollbacks of Dodd-Frank regulation allowed banks like SVB to go unchecked.
“We passed these strong standards with Dodd-Frank, we weakened those standards precisely when the Republican bill weakened the standards for $100 billion-$250 billion institutions and those are the exact institutions that have this problem,” Democratic Rep. Brad Sherman said, referring to a 2018 banking deregulation law.
Fed, FDIC officials decline to say if anyone will be fired as a result of bank failures
FedVice Chair for Supervision Michael Barr admitted that supervisors at theFeddid not escalate issues they identified at Silicon Valley Bank “promptly enough and forcefully enough.”
“That's one of the reasons why we need to really look internally at our own system of oversight,” he said in his testimony at the House Financial Services Committee on Tuesday. But Barr declined to answer a Republican lawmaker’s question regarding whether anyone at theFedwould be fired as a result.
Similarly, the Federal Deposit Insurance Corporation admitted supervisory shortcomings on its end with regard to Signature Bank in a recent report on the bank’s failure.
Martin Gruenberg, chairman of the FDIC, said “it's incumbent on us to do a comprehensive review of our supervision program, including our staffing structure.”
Yellen to meet with Jamie Dimon, Jane Fraser and other bank CEOs on Thursday as debt ceiling crisis looms
From CNN's Matt Egan
With time running out to reach a deal on the debt ceiling, Treasury Secretary Janet Yellen plans to meet with bank CEOs on Thursday afternoon in Washington, sources tell CNN.
JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Jane Fraser plan to attend the Yellen meeting, which will very likely include a focus on the debt ceiling and the banking crisis, according to people familiar with the matter.
The huddle with bank executives is part of an annual meeting held by the Bank Policy Institute, a financial trade group that represents dozens of banks including Goldman Sachs, Wells Fargo and Citigroup.
Bank of America CEO Brian Moynihan also plans to attend the BPI meeting, the company told CNN.
The Treasury Department previously confirmed that Yellen plans to meet this week with the Bank Policy Institute's board of directors, which is chaired by Dimon and includes the CEOs of BNY Mellon, Citigroup and Truist.
Dimon has been outspoken on the debt ceiling, warning last week in a Bloomberg interview that a default would be "potentially catastrophic" and risks setting off "panic" in financial markets.
As the White House and Republican leaders struggle to reach a deal on the debt ceiling, Yellen has stepped up her warnings about the economic stakes.
"Time is running out," Yellen said in a speech before the banking industry on Tuesday. "The US economy hangs in the balance. The livelihoods of millions of Americans do too. There is no time to waste."
Fed's Barkin: "Demand is cooling but not yet cold"
Federal Reserve Bank of Richmond President Thomas Barkin said Tuesday the USeconomystill has momentum and that he is "comfortable" with raising rates again if necessary.
"I'm still looking to be convinced that demand will come down and then of course, that that will bringinflationdown at a pace that won't erode expectations," Barkin told Bloomberg in an interview.
Barkin, like some otherFedofficials, said Tuesday that a pause or another rate hike ultimately depends on what economic indicators show in the coming weeks, including the impact of the political standoff over raising the government's debt limit.
"You've got questions about the debt ceiling and what impact that might have. You've got questions about credit tightening and how significant that might be, so I think it gives you time and optionality to say either there's still more we need to do so let's do more, or it's still OK to wait and we'll wait a bit," Barkin said.
Fresh data on the job market and inflationare set to be released in the days before theFed's two-day monetary policy meeting in mid-June.
Barkin is not a voting member on the Fed's monetary policy committee this year.
SVB CEO says he went to Hawaii following bank collapse to be with wife's family
Former Silicon Valley Bank CEO Greg Becker defended his decision to go to Hawaii following the regional lender's collapse.
"My wife and I made a decision — we decided we were going to go to one of two places to be with family. Either we would be with my family in Indiana or her family in Hawaii," Becker said. "We decided to go to Hawaii."
Becker also said that he offered Federal Deposit Insurance Corporation assistance in finding acquirers for SVB during the weekend following its collapse.
"I was terminated on Sunday and I had no interaction with any of my team, and I offered to do anything I could to help the FDIC. ... They didn't take me up on that advice," Becker said. I'm not faulting them. I don't know why they did that."
Elizabeth Warren: This is "just plain wrong"
From CNN's Allison Morrow
Senator Elizabeth Warren, an outspoken critic of the regulatory rollbacks bank executives have lobbied for, was fired up in questioning the former heads of Silicon Valley Bank and Signature on Tuesday.
Warren accused the bank representatives of failing to pay attention to warnings from regulators and instead taking on more risk and boosting their own paychecks.
In 2019, "the same year you got a $10 million paycheck," she said to former SVB CEO Greg Becker, "the Fed had warned of 17 unresolved supervisory issues," including "a litany" of management failures.
Noting that the collapse of SVB cost the FDIC fund $20 billion, Warren pressed Becker in a heated exchange on how much of his own compensation he was planning to return to the FDIC.
Becker: "Senator, I promise to cooperate with regulators as they do a review —"
Warren: "Are you planning to return a single nickel to what you cost the fund?"
Becker: "Senator, I know there's going to be a process review of compensation —"
Warren: "I'll take that as a no."
The senator repeated her line of questioning with Signature Bank's co-founder and former chairman, Scott Shay, who began to reply that he believed Signature was "a responsibly managed bank." Warren quickly interjected: "Well, I'm sorry, your opinion on what is a responsibly managed bank is now laughable."
Asked how much of his salary he planned to return, Shay replied that he's not planning to return any.
Summing up, Warren said: "Right now the law says that people like Mr. Becker and Mr. Shay can come to Washington, they can lobby for weaker bank regulations, they can load up their banks with risk, they can pay themselves tens of millions of dollars...and when the banks blow up, Mr. Becker and Mr. Shay get to keep all the money. And that is just plain wrong."
Nasdaq rises as debt ceiling concerns and gloomy Home Depot outlook weigh on stocks
The tech-heavy Nasdaq rose 0.1% on Tuesday, reversing earlier losses as the other major indexes continued to decline.
Shares of tech stocks, which have been popular defensive positions this year, gained. Alphabet shares rose 2.6%, Nvidia added 1.8%, Tesla increased 1.3% and Microsoft ticked up about 1%.
The S&P 500's communication services and information technology sectors rose, outperforming the broad-based index. The S&P 500 fell 0.3%.
Shares of Home Depot declined 1.4% after the company reported a disappointing quarter and lowered its outlook for the year.
The Dow fell 225 points, or 0.7%, as Wall Street digested the gloomy forecast from Home Depot, which is seen as a retail bellwether.
SVB exec won't commit to returning bonus
From CNN's Allison Morrow
Former Silicon Valley Bank CEO Greg Becker said Tuesday he would cooperate with regulators but declined to commit to returning the executive bonuses that he and his leadership team received on March 10, just hours before the bank collapsed.
Becker said the cash and stock bonuses were "predetermined" and that he wasn't aware of when they would be paid out.
"Do you intend to return any of the bonuses you received?" asked Sen. Bob Menendez. "Yes or no?"
Becker responded vaguely, saying he would "cooperate with the regulators as they go through the process to look at that specific area."
Regulators have identified major weaknesses in SVBs incentive compensation program, Menendez continued, saying it encouraged "excessive risk-taking to maximize short-term financial metrics."
"In other words, the incentive structure you and your colleagues put in place rewarded breakneck growth and profitability, while kneecapping efforts to manage growing risks to the firm...Clearly, the compensation structure at your institution was not in line with the long-term interests of your shareholders and deposit holders," Menendez said.