Stocks on Wall Street battle for direction as SVB's failure ignites fears for banks
- US stock futures traded mixed after the US bailed out SVB's depositors late Sunday night.
- The Biden administration said Sunday that the failed bank's customers would be made whole.
US stock futures traded higher but erased most of their early gains Monday as big banks continued to struggle after SVB Financial's collapse.
Benchmark S&P 500 futures rose 0.03% and Nasdaq Composite futures jumped 0.60%, but contracts on both indexes briefly traded in the red Monday after giving up most of the gains they had made earlier in the morning. The Dow Jones Industrial Average was on pace to shed 90 points at the opening bell.
Those moves came after Treasury Secretary Janet Yellen, Federal Reserve chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) chairman Martin J. Gruenberg said in a joint statement that the FDIC would guarantee deposits for customers of SVB and Signature Bank, which regulators shut down on Sunday.
SVB's collapse Friday rattled financial markets by dragging on big bank stocks, wiping $55 billion in market value off Wall Street's top four banks in a single day.
The struggles of the so-called "big four" continued Monday, with Bank of America leading big banks' losses with a 3.8% plunge. JPMorgan fell 0.9%, Wells Fargo slipped 3%, and Morgan Stanley dropped 1.1% ahead of the opening bell.
Elsewhere in banking, First Republic Bank plunged 65% in Monday's premarket after it said in a Sunday night statement that it had $70 billion in unused liquidity from agreements with the Federal Reserve and JPMorgan amid an ongoing crunch. Swiss-listed Credit Suisse shares fell 11.6% to hit a new all-time low as fears about contagion spread.
But bond prices rallied Monday with investors betting that the Fed will ease up quicker than expected on its interest-rate hiking campaign in a bid to prevent contagion from SVB's collapse spreading across financial markets.
Yields on 2-year US Treasury notes fell over 39 basis points to 4.19% on Monday - it's biggest one-day drop since the financial crisis of 2008.
Meanwhile yields on 10-year US Treasury notes were down 10 basis points to 3.60%. Bond prices rise when yields fall.
"A big steepening, with investors reassessing how far the Fed will go now given the news," Deutsche Bank managing director Jim Reid said in a Monday research note.
Here's what else is happening in markets this morning:
- Europe's flagship Stoxx 600 fell 1.9%, with Paris' CAC 40 down 2.1% and Frankfurt's DAX 40 slipping 2.4%. London's FTSE 100 fell 1.8%, despite SVB agreeing to sell its UK unit to HSBC for just 1 pound ($1.21).
- Asian stocks finished the day mixed, with Tokyo's Nikkei 225 falling 1.1% but the Shanghai Composite jumping 1.2% and the Hong Kong Hang Seng up 2% at the closing bell.
- The dollar slipped as investors bet on fewer rate hikes, with the US dollar index – which tracks the greenback against a basket of six other currencies – down 0.4% to just over 104.
- Digital assets rallied as investors' hopes of the Fed easing up outweighed the collapse of crypto-friendly banks Silvergate and Signature last week. Bitcoin jumped 3.3% to over $22,000 in early-morning trading Monday.