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March 24 (UPI) -- Lingering concerns about a global banking crisis left most major market indices on Wall Street in the red on Friday, though the head of the St. Louis Fed tried to soothe broader concerns. As of 11:15 a.m. EDT, the Dow was down 0.69% and the S&P 500 was 0.83% below levels from previous close. The tech-heavy NASDAQ was off by 0.92%, and crude oil prices were trading at around 2% lower during the session.
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Broader markets were already on their back foot following the collapse of Silicon Valley Bank and the merger of struggling Credit Suisse and Swiss investment bank UBS. Germany's Deutsche Bank on Friday became the latest victim of contagion, with its shares tumbling more than 13% early in the day.
Friday marked the third straight day that Deutsche Bank stocks slipped. Shares in the German bank have lost 20% of their value so far in March.
Speaking in the wake of the U.S. Federal Reserve decision to increase the target federal funds rate by 0.25 percentage point, St. Louis Fed Chief James Bullard cautioned that inflation is still running at about three times as high as the target rate of 2%, but it appears that fears of a major banking crisis are exaggerated.
"Financial stress has been on the rise in recent days, but the macroprudential policy response has been swift and appropriate," he said in his prepared remarks.
Broad-based concerns in the finance sector are reminiscent of the so-called Great Recession in 2007-08, which was triggered by the collapse of Lehman Brothers after heavy exposure to subprime mortgages.
Bullard said this financial sector is not the same as the one that existed more than a decade ago as central banks and private banks deploy tools that limit damage that would otherwise have occurred without the necessary safety valves in place.
"Let me be clear: the government's recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors' savings and the banking system remain safe," U.S. Treasury Secretary Janet Yellen said earlier this week.
Bullard at the St. Louis Fed said data on gross domestic product point to an upward trajectory, with the Atlanta Fed's GDPNow forecast pointing to a first quarter expansion of 3.2%, though in the fight against inflation, good data is sometimes bad.
"Normally, a strong labor market bodes well for consumption expenditures, the largest component of GDP," he said.
More jobs mean more demand, which leads to higher inflation. A formal recession would include heavy job losses, though that's not been the case outside the tech sector.
While global markets have suffered heavy losses since the collapse of SVB, Carsten Brzeski, the global head of macroeconomics for investment bank ING, said any talk of a systemwide financial meltdown is largely overblown.
