Stocks retreated as comments from Treasury Secretary Janet Yellen rattled bank stocks and Jerome Powell dashed hopes the Federal Reserve would cut rates this year.

Yellen’s testimony to lawmakers that the government is not considering expanding deposit insurance sent regional bank shares into a tailspin that weighed on broader indexes. Stocks initially rallied after the Fed hiked by a quarter percentage point as expected. The market also gave up gains after Powell said he’s prepared to keep raising rates until inflation shows signs of cooling.

“Her comments clearly affected bank stocks negatively, but her comments roughly coincided with Powell’s comments that they will continue to do what take to fight inflation, including raising rates more than anticipated. So it’s tough to untangle them,” said Steve Sosnick, chief strategist at Interactive Brokers.

In a broad-based selloff, the S&P 500 dropped 1.7 per cent. All 22 stocks in the KBW Bank Index retreated, with the measure of U.S. financial heavyweights down almost 5 per cent. Treasury two-year yields plunged 24 basis points to around 3.9 per cent. The dollar retreated for a fifth straight day — its longest losing streak since April 2021.

Key events this week:

• Eurozone consumer confidence, Thursday
• BOE interest rate decision, Thursday
• Swiss National Bank rate decision and press conference, Thursday
• U.S. new home sales, initial jobless claims, Thursday
• U.S. Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
• Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
• U.S. durable goods, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.4 per cent
• The Dow Jones Industrial Average fell 1.6 per cent
• The MSCI World index fell 0.5 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.6 per cent
• The euro rose 0.9 per cent to US$1.0863
• The British pound rose 0.5 per cent to US$1.2274
• The Japanese yen rose 1 per cent to 131.21 per dollar

Cryptocurrencies

• Bitcoin fell 4.7 per cent to US$26,840.87
• Ether fell 4.3 per cent to US$1,724.27

Bonds

• The yield on 10-year Treasuries declined 17 basis points to 3.44 per cent
• Germany’s 10-year yield advanced four basis points to 2.33 per cent
• Britain’s 10-year yield advanced eight basis points to 3.45 per cent

Commodities

• West Texas Intermediate crude rose 0.5 per cent to US$70.01 a barrel
• Gold futures rose 1.7 per cent to US$1,991.50 an ounce