Banks and Energy Stocks Lead Wall Street Slide Ahead of Federal Reserve Meeting

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Investors are becoming increasingly worried about the impact of further interest rate hikes on the US economy and banking system. As a result, US stock indexes have taken a tumble, with banks and energy shares leading the way. The Federal Reserve is expected to raise interest rates by 25 basis points to a range of 5% to 5.25%, which will be its highest level in almost 16 years when the central bank concludes its two-day policy meeting on Wednesday.

Investors are waiting to see if the Fed will signal that this week's rate increase is the last, at least for now. Many believe that if the Fed doesn't make this clear, the banking system will continue to experience turmoil.

The collapse of First Republic Bank has also impacted US regional banks. Most of First Republic Bank's assets were bought by JPMorgan Chase & Co in a deal brokered by the Federal Deposit Insurance Corp on Monday. This has caused PacWest Bancorp to tumble 26.4%, while Western Alliance Bank and Comerica Inc have dropped 19% and 10.6% respectively. The KBW Regional Banking index has tumbled 6.0%, while the broader S&P 500 bank index has declined 3.7%.

The energy sector has also taken a hit, with oil prices dropping nearly 5% on concerns of a potential US debt default. This has dragged the S&P 500 energy index down by as much as 5%.

Despite worries about an economic downturn and stress in the banking sector, chances of rate cuts seem less likely this year, with inflation running well over the central bank's 2% target and a still-strong labor market. Analysts expect first-quarter earnings for S&P 500 companies to fall 1.4% from a year earlier.

At 12:36 p.m. ET, the Dow Jones Industrial Average was down 501.54 points, or 1.47%, at 33,550.16, the S&P 500 was down 63.74 points, or 1.53%, at 4,104.13, and the Nasdaq Composite was down 157.86 points, or 1.29%, at 12,054.74. Declining issues outnumbered advancers for a 5.48-to-1 ratio on the NYSE and a 3.17-to-1 ratio on the Nasdaq.

Investors will be keeping a close eye on the Fed's decision on interest rates, as well as any signals that the rate increase is the last, in order to gain a better understanding of the future of the US economy and the banking system.

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