Stocks Falling as European Banking Worries Flare Up

U.S. stocks are falling in pre-market trading as recent banking turmoil on this side of the pond made its way to Europe. Credit Suisse is falling and dragging the European banking sector down after its largest shareholder said it will not provide further capital assistance. This is exacerbating recent worries toward the financial system that has come from some failures of U.S. regional financial institutions and has called into question on whether the Fed may pause its aggressive monetary policy campaign. Meanwhile, a benign read on February producer price inflation was a welcomed sign, and last month's retail sales report showed a key core component of spending unexpectedly rose and the prior month's figures were revised to larger-than-expected jumps. In other economic news, mortgage applications rose for a second-straight week, but manufacturing output in New York contracted much more than anticipated. After the opening bell, we will get a read on homebuilder sentiment and business inventories. In other equity news, Lennar Corporation topped quarterly expectations. Treasury yields are resuming a tumble and the U.S. dollar is rallying. Crude oil prices are dropping and gold is gaining solid ground. Asia finished mostly higher after the rebound in the U.S. yesterday, while Europe is falling on the banking worries.

As of 9:03 a.m. ET, the June S&P 500 Index future is 72 points below fair value, the Nasdaq Index future is 166 points south of fair value, and the DJIA future is 565 points below fair value. WTI crude oil is dropping $1.97 to $69.36 per barrel, while Brent crude oil is falling $1.69 to $75.76 per barrel. The gold spot price is up $22.40 to $1,933.30 per ounce. Elsewhere, the Dollar Index is rallying 1.1% to 104.66.

The banking sector remains volatile and trading to the downside, with the turmoil flaring up in Europe after Credit Suisse Group AG (CS $3) is tumbling after its top shareholder, the Saudi National Bank, said it will not provide more capital assistance. This comes following the failures of SVB Financial Group (SIVB), and crypto-related Silvergate Capital Corp. (SI), and the closure of Signature Bank (SBNY) over the weekend. These stresses have fostered severe volatility in the markets and fueled concerns about contagion in the financial markets. Meanwhile, the Treasury Department, the Fed and Federal Deposit Insurance Corporation (FDIC) have enacted several measures to contain the issue.

For a look at what our experts think about the recent stock market drop, read our latest article, Bank Failure Pressures Stocks. Fixed Income Strategist with the Schwab Center for Financial Research, Collin Martin notes that, "The U.S. banking system is still relatively healthy. Capital ratios, a measure of banks' ability to cover their loans, have declined over the last year but are still at adequate levels." Meanwhile, he adds that "although markets are still pricing in additional Fed rate hikes at upcoming policy meetings, concerns about the financial sector have helped push down the expected "peak" rate."

In other equity news, Lennar Corporation (LEN $101) reported fiscal Q1 earnings-per-share (EPS) of $2.06, exceeding the $1.55 FactSet estimate, as revenues grew 5.0% year-over-year (y/y) to $6.49 billion, versus the Street's expectation of $5.91 billion. The homebuilder issued Q2 new orders and delivery guidance that was above estimates and raised its full-year delivery outlook.