The stock market’s major indices held on to gains and stayed close to session highs in afternoon trade on Monday. Investors breathed a sigh of relief that the Fed is unlikely to raise interest rates as quickly as expected as the bank meltdown continued.
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Three banks have failed in the past few days. Crypto bank Silvergate (AND), SVB Financial‘s (SIVB) Silicon Valley Bank and Signature Bank (SBNY) is facing a run on its deposits.
The Silicon Valley Bank closure was the second largest bank failure in US history, and Signature Bank was the third.
The FDIC transferred Signature Bank’s deposits to a bridge bank. Brobanken is a full-service bank operated by the agency as it markets the institution to potential bidders.
Addressing the public Monday morning, President Biden said, “Thanks to my administration’s swift action over the past few days, Americans can have confidence that the banking system is safe.”
Still, bank stocks continued to fall. The SPDR S&P Bank ETF (KBE) lost 8.2 per cent.
The 10-year US Treasury yield fell 17 basis points to 3.54% as investors fled to lower-risk assets. The 10-year bond posted its biggest three-day drop in yields since Nov. 20, 2008, during the financial crisis.
The two-year Treasury yield fell to 4.16% earlier today. The decline represents the largest one-day decline since September 15, 2008 and the largest three-day decline since October 22, 1987.
The CME FedWatch Tool now sees a 73% chance of a 25 basis point rate hike at the Federal Reserve’s March meeting. Almost 37% expect no changes in rates.
NYSE and Nasdaq volumes were higher than Friday at the same time of the day.
Major stock market indices are having a wild ride
The Dow Jones Industrial Average rose 0.5 percent. The S&P 500 rose 0.7 percent. The Nasdaq composite was the best performer with a return of 1.4%. The small-cap Russell 2000 fell 0.9%, weighed down by its 15% banking component.
The Dow, Nasdaq and S&P 500 remain below their 50-day and 200-day moving averages.
The tech-heavy Nasdaq 100-tracker Invesco QQQ Trust ETF ( QQQ ) recovered 1.7%. Innovator IBD 50 ETF (FFTY) pared losses to 0.3%.
Crude oil lost 2.6% to $74.68 a barrel.
Gold futures rose 2.6% to $1,916 per ounces. The SPDR Gold trust ETF (GLD) rose 2.2% as investors looked elsewhere for a place for their money.
The dollar fell against major currencies as the banking woes reduced the odds of higher interest rates. The US currency often follows movements in government bonds.
The WSJ Dollar Index, which tracks the dollar against a basket of currencies, fell 1 percent. Invesco DB US Dollar Bullish (UUP) fell 0.9% after meeting resistance at the 200-day line last week.
Bitcoin futures rose 22% to $24,355 as investors sought other assets and federal support came to banks catering to crypto customers.
Stock market woes: Selling of bank shares continues
First Republic Bank (FRC) fell 50% to continue its selloff on liquidity concerns after trading was temporarily halted earlier in the session. The regional bank crashed despite bailout funding from the Federal Reserve and JPMorgan Chase (JPM).
The regulators took over Signature Bank (SBNY) on Sunday, making it the third-biggest bank decliner. Western Alliance Bancorp (WAL) fell more than 48% as regional banks saw more weakness.
The SPDR Select Regional Bank ETF ( KRE ) fell 10.2% as the sector sold off. SPDR Select Financial (XLF) fell 2.9 per cent.
Wells Fargo (WFC) fell 5.8% in heavy volume.
Charles Schwab (SCHW) pared losses to about 9% after trading in the stock was temporarily halted. Citigroup upgraded Schwab to buy from neutral despite the negative stock action.
Other stock market movers
Illumina ( ILMN ) rose 17% in heavy volume on news that activist investor Carl Icahn is seeking to nominate three people to the gene-sequencing company’s board. Shares rose above the 50-day and 200-day lines. ILMN was the biggest gainer of the S&P 500 today.
Set (SGEN) rose over 15% on news that Pfizer (PFE) will buy the cancer treatment developer for about $43 billion. PFE rose 1.7% on the news.
For more stock news, follow Kimberley Koenig on Twitter @IBD_KKoenig.
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