The Fed announced its latest round of interest rate hikes and signaled that the end of the rate hike was imminent, and the three major indexes of U.S. stocks closed lower. By the close, the Dow was down 0.80%; The NASDAQ fell by 0.46%; The S&P 500 fell 0.70%.

As expected by financial markets, the Fed raised its benchmark overnight interest rate by 0.25 percentage points to a range of 5.00%-5.25%, which is already the 10th consecutive rate hike since the Fed launched the current round of interest rate hikes last year, with a cumulative increase of 500 basis points.

The Fed removed the phrase "appropriate for further rate hikes" in its resolution statement, signaling that it would pause rate hikes. Fed Chairman Jerome Powell said that whether further rate hikes are necessary while the economy still faces high inflation is an open question, while the economy is also showing signs of slowing and the risk of tough credit from banks is imminent.

"We're closer to the end of the rate hike, and may even have reached the end point," Powell said of the end of the rate hike. The Fed's policy rate has been raised by a full 500 basis points in the 10 meetings since March 2022, which is an exciting pace for the Fed and it may now take some time to fully feel the impact of the rate hike.

The Fed used language reminiscent of when it stopped its tightening cycle in 2006, saying that "in determining the appropriate level of further tightening," officials will consider how the effects of monetary policy on the economy are cumulative.

When referring to JPMorgan's acquisition of First Republic Bank on the same day, Powell said that it is not a good policy for large banks to make large-scale acquisitions, but the acquisition of failed banks is a good result for the banking system, and it is valuable to have banks of different sizes in the system to achieve different goals.

At the moment, the market is most concerned about when the Fed will turn to monetary easing. According to CME Group's Fed Watch tool, most market participants expect the Fed to pause rate hikes after this 25 basis point hike and then start cutting rates as early as September.

Another US bank danger!

U.S. banking turmoil has intensified, with shares of Los Angeles-based PacWest (PACW) plunging more than 55 percent in after-hours trading on Wednesday, dragging down other bank stocks. It was previously reported that the bank's management was considering a sale.

The bank has reportedly not found a buyer interested in a full-scale acquisition of it and may seek to spin off or raise new capital. The report also said that any buyer could be at risk of huge losses due to loan impairment.

PacWest has 67 branches in California, one in Denver, Colorado, and one in Durham, North Carolina.

The bank's sudden drop after hours on Wednesday spilled over into other bank stocks, including Western Union Bank (WAL) and Zion Bank (ZION). Shares of the two banks fell 30% and 11.9%, respectively, in after-hours trading.

The sharp drop in PacWest shares followed optimistic comments from the bank's management last month after investors worried that the run that bankrupted Silicon Valley banks could prompt panicked consumers to divest from other banks.

Paul Taylor, CEO of PacWest, said at the company's earnings conference last month: "Our strong banking business and loyal, diversified customer base have propelled us through one of the most challenging periods in the banking industry in recent times. ”

"Our deposits have stabilized, with insured deposits increasing from 48% of total deposits at the end of the year to 71% of total deposits on March 31, 2023," he added. Importantly, deposits stabilized in late March and rebounded in April, adding about $700 million after the end of the quarter. ”

As of the end of March, PacWest's deposits totaled $28.2 billion.