A tumultuous week in US financial markets ended on an uncertain note Friday after a massive $30 billion injection of large bank deposits into First Republic Bank failed to appease investors.
Last week, the sudden collapse of three US banks – Silvergate Capital, Signature Bank
and Silicon Valley Bank – concerns about weakness in the banking sector have begun to rekindle amid sharply higher interest rates.
SVB Financial Group
filed for Chapter 11 bankruptcy on Friday and said it will seek a court-supervised reorganization. Silicon Valley Bank was placed in receivership by the federal government following a run on its deposits.
Within days, other regional banks and financial firms have been swept up in the sell-off.
Bank of the First Republic
another medium-sized bank in California, saw its share price hit an intraday low this week, before the bank was promised a $30 billion commitment in deposits from a group of the nation’s largest banks, including JPMorgan Chase.
bank of America
In Europe, shares of Swiss banking giant Credit Suisse
fell to about $2 a share in New York trading. The bank said on Thursday it planned to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank to boost its liquidity. Shares of the New York bank were down 33.9% year-over-year through Friday.
Here’s an overview of the major swings in the financial markets over the past week or so.
Shares of the SPDR S&P Regional Banking ETF
which covers the regional banking segment of the broader S&P 500 index fell 24.5% in the past seven trading days since March 9, a day after SVB announced it had sold a portfolio of securities at a loss of more than $1 billion. Depositors began to flee and the bank was shut down by regulators on March 10.
The Treasury, FDIC and Federal Reserve announced guarantees on all deposits at Silicon Valley Bank and Signature Bank on Sunday to bolster confidence in the banking sector.
Shares of the SPDR S&P Regional Banking ETF fell 6% on Friday. Shares of First Republic Bank fell 32.8% as $30 billion inflows failed to calm jittery investors.
A sell-off in bank stocks dragged the broader stock market down and exited the S&P 500 index
down 2.1% since March 9, briefly wiping out the gains of the large-cap benchmark from early 2023.
The S&P 500 ended Friday down 1.1%, but gained 1.4% this week, according to Dow Jones Market Data. It was up 2% for the year as of Friday.
The Nasdaq Composite Index
outperformed the Dow Jones Industrial Average this week by 4.45 percentage points, its largest weekly outperformance since March 20, 2020, according to Dow Jones Market Data.
The jump in the biggest technology and semiconductor names helped limit losses on the Nasdaq 100 index, which tracks the top 100 technology companies on the Nasdaq Stock Exchange.
The Nasdaq Composite Index
ended lower Friday, but posted a weekly gain of 4.4%, as the Dow Jones Industrial Average
fell 0.2% for the week.
To see: Microsoft, Apple and Meta are outperforming as investors seek safety in mega-cap technology stocks
The bond market also experienced a week of extremes. The yield on the 2-year treasury
fell 74 basis points, the biggest weekly drop since October 1987, a period marked by the Black Monday stock market crash, according to Dow Jones Market Data.
To see: Why bond market volatility is at its highest since the 2008 financial crisis amid rolling fallout from banks
Adding to the swings, February’s CPI report showed little progress in cooling high inflation, which did not ease into the weekend. The policy-sensitive 2-year Treasury yield fell 28.4 basis points to 3.846% on Friday. That was the lowest level since September 14, 2022.
Trading in the Fed futures market was also choppy, with a 40% chance of a Fed rate hike next week on Friday and a 60% chance that policymakers will raise rates by another 25 basis points to a range of 4. 75%-5%, according to the CME FedWatch tool.
Gold prices rose 8.1% over the past seven trading days, ending Friday at their highest level in 11 months and recording their best weekly gains in nearly three years, according to Dow Jones Market Data. Fears of potential further stress in the banking sector weighed on investor sentiment, strengthening the yellow metal’s appeal as a safe haven asset.
Gold futures for April delivery
gained $50.50, or 2.6%, to settle at $1,973.50 an ounce on Comex on Friday, with the most active contract gaining 5.7% for the week. That was the highest settlement for the yellow metal since April 18, 2022, and the biggest weekly gain since April 2020, according to Dow Jones Market Data.
The ICE US Dollar Index
a gauge of the dollar’s strength against a basket of rivals, is down 1.5% since last Thursday. The dollar also closely follows the movements of the 2-year interest rate.
The dollar index rallied Wednesday morning as concerns over Credit Suisse’s liquidity revived concerns about risk in the global banking system, leading to buying the dollar as a safe haven.
Oil futures plummeted with the most active U.S. contract finishing at its lowest level in 15 months and posting the biggest weekly drop in nine months, according to Dow Jones Market Data.
The US benchmark West Texas Intermediate crude for April delivery
fell $1.61, or 2.4%, to settle at $66.74 a barrel on the New York Mercantile Exchange, giving the contract a 13% weekly loss, according to Dow Jones Market Data.
According to Dow Jones Market Data, the contract is down 14.2% over the past seven trading sessions.
Bitcoin’s price took a hit last Wednesday when Silvergate Capital Corp.
said his crypto-friendly Silvergate Bank would wind down and liquidate operations, aiming to pay back all deposits.
However, after the failures of SVB and Signature Bank, bitcoin rallied more than 20% in the past nine sessions, to trade at $26,750.50 on Friday, according to CoinDesk data.
Bitcoin has long been viewed with skepticism by the financial establishment, but its supporters have argued that it is an alternative to the traditional banking system.
To see: What happened to Silvergate Capital? And why does it matter?
Leave a Reply