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US Stocks End Lower as Regional Banks Collapse Before Fed Rate Increase

US equities closed Tuesday's trading session down, with regional bank stocks registering yet another day of sharp declines ahead of the Federal Reserve's anticipated rate rise.

On Wednesday, the Fed is generally expected to increase its key lending rate for the tenth and likely last time in an effort to combat excessive inflation.

At 33,684.46, the Dow Jones Industrial Average saw a 1.1 percent decline.

The tech-heavy Nasdaq Composite Index sank 1.1 percent to 12,080.51, while the broad-based S&P 500 slid 1.2 percent to 4,119.60.

Due to worries about local banks, crude oil futures also ended the day down by more than 5%.

CEO of 50 Park Investments Adam Sarhan said in an interview that “fear is a powerful emotion on Wall Street.”

“When fear takes over, logic is out the window,” he said.

Some analysts believed that the worst might be over for regional banks after the market's response to the failure of First Republic Bank on Monday.

The KBW Nasdaq Regional Banking Index ended the day down by more than 5.5 percent, making Tuesday just another difficult day for regional banks.

According to LBBW director Karl Haeling, “There is clearly concern that this bank situation is not going to improve after First Republic, it's only going to get worse.”

Among the troubled regional banks, PacWest of Los Angeles had a decline in its share price of about 28%, while Western Alliance of Phoenix saw a decline of more than 15%. The share price of New York-based Metropolitan Bank fell by more than 20% as well.

But Sarhan from 50 Park Investments suggested that not everything may be gloom and doom for the larger US stock market.

Prior to an interest rate decision, the financial markets frequently move in a “big direction,” he said.

He said, “It seems like the market is attempting to put pressure on the Fed to decrease rates.

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