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Wall Street closed mixed after an extremely choppy session on Monday. Shares of regional banks plunged despite the government’s decision to safeguard all depositors of the collapsed Silicon Valley Bank. The Dow and the S&P 500 ended in negative territory while the Nasdaq Composite finished in positive zone.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.3% to close at 31,819.14, marking the fifth consecutive close in loss, its longest streak since December. Notably, 16 components of the 30-stock index ended in negative territory and 14 in positive zone.
The tech-heavy Nasdaq Composite finished at 11,188.84 gaining 0.5% due to strong performance of large-cap technology stocks. The S&P 500 lost 0.2% to end at 3,855.76. Seven out of 11 broad sectors of the benchmark index closed positive territory while four ended in red.
The Real Estate Select Sector SPDR (XLRE) and the Utilities Select Sector SPDR (XLU) advanced 1.6% and 1.5%, respectively. On the other hand, the Financials Select Sector SPDR (XLF) and the Energy select Sector SPDR (XLE) tanked 4% and 2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 6.8% to 26.52, marking its highest closing in three months. At its intraday high, the index reached at a five-month high of 30.81. A total of 15.21 billion shares were traded on Monday, higher than the last 20-session average of 11.14 billion. Decliners outnumbered advancers on the NYSE by a 2.31-to-1 ratio. On Nasdaq, a 1.63-to-1 ratio favored declining issues.
Rescue Package for SVB
Last weekend, a joint statement from the Fed, Treasury Department and the Federal Deposit Insurance Corp. (FDIC) said all SVB depositors will be able to access to their money starting Mar 13. Moreover, The central bank is in the process of creating a new Bank Term Funding Program in order to safeguarding deposits. Per CNBC, the facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions.
Shares of Regional Banks Collapse
After SVB, Signature Bank (SBNY - Free Report) has also failed. Market participants remained highly concerned that the contagion effect of the SVB will spread to other regional banks despite government’s attempt to safeguard government money.
Investors have drastically shifted their money from equities to safe-haven U.S. government bonds following the SVB fiasco. As a result, bond prices soared and yield to maturity dropped. On Mar 13, the yield on the short-term 2-Year U.S. Treasury Note plunged 59 basis points to 4.005%. Since Mar 9, this yield has fallen a full 1%, marking the largest three-day decline since Oct 22, 1987. Moreover, the yield on the benchmark 10-Year U.S. Treasury Note fell 15 basis points to 3.543%.
Change in Interest Rate Expectation
The Silicon Valley Bank was the first major victim of the Fed’s aggressive rate hike policies to combat a record-high inflation. Signature also follow suite. Consequently, market participants’ expectation for interest rate trajectory for the near-term has changed remarkably.
Consequently, the CME FedWatch is now showing an overwhelming 70.9% probability that the Fed will raise the benchmark lending rate by 25 basis points in March FOMC meeting. Importantly, 29.1% respondents expect the central bank to keep the interest rate static at the current range of 4.5 to 4.75%. No respondent expects more than 25 basis point rate hike.
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Stock Market News for Mar 14, 2023
Wall Street closed mixed after an extremely choppy session on Monday. Shares of regional banks plunged despite the government’s decision to safeguard all depositors of the collapsed Silicon Valley Bank. The Dow and the S&P 500 ended in negative territory while the Nasdaq Composite finished in positive zone.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.3% to close at 31,819.14, marking the fifth consecutive close in loss, its longest streak since December. Notably, 16 components of the 30-stock index ended in negative territory and 14 in positive zone.
The tech-heavy Nasdaq Composite finished at 11,188.84 gaining 0.5% due to strong performance of large-cap technology stocks. The S&P 500 lost 0.2% to end at 3,855.76. Seven out of 11 broad sectors of the benchmark index closed positive territory while four ended in red.
The Real Estate Select Sector SPDR (XLRE) and the Utilities Select Sector SPDR (XLU) advanced 1.6% and 1.5%, respectively. On the other hand, the Financials Select Sector SPDR (XLF) and the Energy select Sector SPDR (XLE) tanked 4% and 2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 6.8% to 26.52, marking its highest closing in three months. At its intraday high, the index reached at a five-month high of 30.81. A total of 15.21 billion shares were traded on Monday, higher than the last 20-session average of 11.14 billion. Decliners outnumbered advancers on the NYSE by a 2.31-to-1 ratio. On Nasdaq, a 1.63-to-1 ratio favored declining issues.
Rescue Package for SVB
Last weekend, a joint statement from the Fed, Treasury Department and the Federal Deposit Insurance Corp. (FDIC) said all SVB depositors will be able to access to their money starting Mar 13. Moreover, The central bank is in the process of creating a new Bank Term Funding Program in order to safeguarding deposits. Per CNBC, the facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions.
Shares of Regional Banks Collapse
After SVB, Signature Bank (SBNY - Free Report) has also failed. Market participants remained highly concerned that the contagion effect of the SVB will spread to other regional banks despite government’s attempt to safeguard government money.
Consequently, shares of First Republic Bank , PacWest Bancorp and Western Alliance Bancorp. (WAL - Free Report) have plummeted 61.8%, 21.1% and 47.1%, respectively. PacWest and Western Alliance currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Yields on Government Bonds Plunge
Investors have drastically shifted their money from equities to safe-haven U.S. government bonds following the SVB fiasco. As a result, bond prices soared and yield to maturity dropped. On Mar 13, the yield on the short-term 2-Year U.S. Treasury Note plunged 59 basis points to 4.005%. Since Mar 9, this yield has fallen a full 1%, marking the largest three-day decline since Oct 22, 1987. Moreover, the yield on the benchmark 10-Year U.S. Treasury Note fell 15 basis points to 3.543%.
Change in Interest Rate Expectation
The Silicon Valley Bank was the first major victim of the Fed’s aggressive rate hike policies to combat a record-high inflation. Signature also follow suite. Consequently, market participants’ expectation for interest rate trajectory for the near-term has changed remarkably.
Consequently, the CME FedWatch is now showing an overwhelming 70.9% probability that the Fed will raise the benchmark lending rate by 25 basis points in March FOMC meeting. Importantly, 29.1% respondents expect the central bank to keep the interest rate static at the current range of 4.5 to 4.75%. No respondent expects more than 25 basis point rate hike.