The Dow Jones Industrials plunged 378.28 points, or 1.1%, to open at 33,673.42.
The S&P 500 dipped 45.74 points, or 1.1%, to 4,122.13.
The NASDAQ Composite let go of 112.59 points to 12,100.01.
Both small and large banks saw their shares decline Tuesday. Regional banks PacWest and Western Alliance had trading paused after tumbling more than 20%. Meanwhile, JPMorgan Chase’s shares shed 1%, giving back some of its gains from the previous session. Other large banks including Goldman Sachs, Bank of America and Citigroup also dropped more than 2.5%.
The Fed’s two-day policy meeting, which kicked off Tuesday, is expected to conclude with the central bank announcing another 25 basis-point rate hike. Per the CME Group’s FedWatch tool, traders are pricing in 97% chance of a rate hike. Investors will be looking for clues on whether the Fed will keep rates steady after this meeting, or if it will further tighten monetary policy to fight inflation.
Investors were focused on the bank sector following the announcement that JPMorgan Chase won the weekend auction for troubled First Republic Bank.
Weighing on sentiment Tuesday was word from Treasury that the country may hit the debt ceiling sooner than expected. Treasury Secretary Janet Yellen warned that the U.S. may run out of measures to pay its debts as early as June 1, earlier than the late July deadline Goldman was estimating.
Wall Street will also watch for data on job openings, factory orders and light vehicle sales on the economic front. Investors will also keep an eye out for the April payrolls data on Friday.
Earnings season also continues this week, with Apple scheduled to announce its quarterly performance on Thursday.
Prices for the 10-year Treasury shot up, lowering yields to 3.45% from Monday’s 3.58%. Treasury prices and yields move in opposite directions.
Oil prices skidded $2.74 to $72.92 U.S. a barrel.
Gold prices regained $19.10 to $2,011.30 U.S. an ounce.