Today more than $100 billion worth of US banks were wiped in a bloodbath on Wall Street sparked by the collapse of Silicon Valley Bank.
Trading was halted intermittently at at least 20 regional banks as the speed of money forced regulators to intervene. The Big Four of US banks were also caught up in the bloodshed. Citigroup’s share price fell 7.45 percent, Wells Fargo sank 7.1 percent, Bank of America sank 5.8 percent and JP Morgan fell 1.8 percent.
Among the hardest-hit regional banks were First Republic, which fell 62 percent, Western Alliance, which closed with a 47 percent loss, and KeyCorp, which fell 21 percent.
The falls hit Street despite the fact that Joe Biden made an intervention minutes before the market opened to affirm that “Americans can have confidence that the banking system is safe.”
Former Trump White House adviser Steve Moore has warned that SVB ‘may just be the tip of the iceberg’, exposing broader weakness brought on by Biden’s $4 trillion COVID stimulus package.
The New York Stock Exchange was in a frenzy this morning as traders reacted to fears in the banking sector.
Joe Biden spoke before the markets opened this morning, stating: “Our actions should give Americans confidence that the American banking system is safe.” It comes after the White House guaranteed yesterday that it would make SVB’s clients ‘complete’ and that ‘the taxpayer will take no loss’
SVB’s sudden collapse on Friday, the second largest in US bank history, came as investors began frantically withdrawing funds amid fears it could no longer keep pace with price rises. fed rates.
Moore told Fox News: ‘I think it’s important that people understand how this potential banking crisis happened. It is not because there are not enough bank regulators, as Biden tries to say.
‘It is because of massive inflation and the trillions and trillions of dollars of borrowing that the federal government has done that has put our financial system in great jeopardy.
‘You can’t keep doing this month after month, year after year, borrowing trillions and trillions of dollars. And so what happened, because of Biden’s spending and debt policies, is that not only did inflation go up, but interest rates went up as well.”
He said the Fed had already raised interest rates multiple times throughout 2022 and has signaled it intends to continue doing so to cool the overheated economy.
“That has caused a lot of financial problems for these big banks because interest rates go up,” Harris added.
But many speculated that the central bank could now become less aggressive, and the 2-year Treasury yield plunged.
Regulators intervened over the weekend to restore investor confidence in the banking system, saying SVB depositors will have access to their funds on Monday.
For some investors, the Fed’s decision next week will also depend on inflation data due this week.
“If we get surprisingly bad Consumer Price Index and Producer Price Index, the Federal Reserve is going to be in a tough spot or a lot tougher than even before those printings,” said Orion Advisor Solutions CIO Timothy Holland. .
Based on preliminary data, the S&P 500 lost 5.82 points, or 0.16%, to close at 3,855.54 points, while the Nasdaq Composite gained 49.74 points, or 0.45%, to 11,188. 63. The Dow Jones Industrial Average fell 86.66 points, or 0.27%, to 31,822.08.
The benchmark S&P 500 index is now up 1% year-to-date. Earlier in the session it fell, briefly erasing all year-to-date gains.
Customers lined up outside a Silicon Valley Bank branch on Monday as they rushed to withdraw their funds after the government promised their cash would be safe.
CPI data is due on Tuesday and PPI on Wednesday.
The defensive utilities sector was among the best performers of S&P’s 11 major sectors, while interest rate-sensitive groups such as real estate and technology also rose.
“The market now expects the Fed probably won’t raise rates this month, so they may enter a pause period,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Shares in Signature Bank, a bank similar to SVB, which was also shut down by regulators, were halted. Nasdaq said they would stay that way until the exchange’s request for additional information was “fully satisfied.”
President Joe Biden has vowed to do whatever is necessary to address the threat to the banking system.
First Republic Bank fell sharply as news of new financing failed to reassure investors, as did Western Alliance Bancorp and PacWest Bancorp. Stock trading was halted several times.
Weighing the S&P 500, Charles Schwab fell as it resumed trading after the financial services company reported a 28% decline in average margin balances and a 4% drop in total client assets in February. .
Shares of big US banks, including JPMorgan Chase & Co, Citigroup and Wells Fargo, lost ground.
The CBOE Volatility Index, known as the Wall Street Fear Gauge, ticked higher.
Traders are now largely pricing in a 25 basis point rate hike by the Federal Reserve in March, with bets that the central bank will keep interest rates at their current level at 31.4%.
Among individual shares, Pfizer Inc rose after the drugmaker said it would buy Seagen Inc for nearly $43 billion.