US stocks start the week with sour sentiment after federal banking regulators act aggressively to prevent the failure of the Silicon Valley Bank.
The S&P 500 Index (^GSPC) fell 1.1% Monday morning, while the Dow Jones Industrial Average (^DJI) decreased by 0.3%. Contracts on the tech-heavy Nasdaq Composite (^IXIC) decreased by 1%.
Bond yields plummeted. The yield on the benchmark 10-year US Treasury note fell to 3.48% on Monday morning, while at the top of the yield curve, the two-year yield fell to 4.17%.
US stocks smoked on Friday, ending their worst week so far this year. Federal regulatory agency shuts down Silicon Valley Bank’s tech-focused lending company in the largest US bank bankruptcy since the 2008 financial crisis.
President Joe Biden spoke to the nation on Monday morning about the collapse of Silicon Valley Bank. Biden said that “taxpayers won’t suffer any loss” and he assures clients they will be protected.
His comments come after regulators took extraordinary action on Sunday. Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg announced that depositors of the failed Silicon Valley Bank would be able to access all their money starting Monday.
The story of Silicon Valley Bank had a viral impact on a second bank: Signature Bank (SBNY) closed on sunday, the second bank bankruptcy in three days. Among the measures, the Fed said depositors will be taken in full. It created a new “Bank Term Financing Program” (BTFP) facility that allows other banks to get quick cash in exchange for collateral.
Nicholas Colas, DataTrek Research co-founder, wrote in a statement.
“Even so, we now know that the Fed’s stress test scenarios (assuming very low Treasury yields during a crisis) are not appropriate in the current environment. Additionally, both interest rates and economic/corporate earnings uncertainty remain,” he added.
Meanwhile, in the UK, British officials work through the weekend to find a buyer for the UK subsidiary of Silicon Valley Bank, with participation from HSBC.
The turmoil on the banking front overshadowed the February jobs report, Exceeded expectations again, as the U.S. economy added 311,000 jobs, a slower pace than the January boom and consensus estimates from economists for a job gain of 225,000. The unemployment rate rose to 3.6% and wage growth rose to 4.6% last year, slower than expected.
Economic releases will dominate the conversation this week as Wall Street pays attention to two data prints as the next Federal Reserve meeting quickly approaches. At the same time, investors will be glued to the latest headlines about the collapse of SVB Financial Group and its implications for the banking industry.
Tuesday’s Consumer Price Index (CPI) kicks into action in Tuesday’s data. Economists expect inflation to increase by 6% over the past year on a headline basis, while on a “core” basis it is 5.5%.
Meanwhile, February’s retail sales are released on Wednesday morning. The final outcome when reading those reports will influence the Fed’s next policy move.
Analysts at Goldman Sachs (GS) already said “no more expectations” The Federal Reserve will raise interest rates later this month amid the SVB setback.
Sorrow banking sentiment spread across markets, as the KBW Bank index (^BKX) fell 12% Monday morning, while index members including Bank of America (NORTH), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (OLD) are traded down.
Other regional banking stocks include First Republic Bank (FRC) plunged more than 60% after JP Morgan lent a hand to the bank. The California-based bank received funding from the Wall Street giant, who brought it more $70 billion in unused liquidity. Western Union Corporation (WAL) plunge more than 70%.
PacWest Bancorp (PACW), Zions Corporation (ZION), Bank of the First Republic (FRC), Financial sector (RF) stock was halted on Monday, triggered by volatility.
In other single stock moves, Roku (ROKU) fell 8% after the company said SVB holds 26% cash and cash equivalents, its every profile to the Securities and Exchange Commission (SECOND).
Shares of the Swiss lending company Credit Suisse (CS) hit one new record low Monday morning on concerns about the ability of European banks to keep deposits amid the collapse of US lender SVB.
In terms of earnings, FedEx (FDX), Adobe (ADBE), common dollar (FIRE) and Lennar (WOOL) will report quarterly results this week.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniroromerotv
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