The Nasdaq Composite actually ended higher on Monday, as some sectors benefited from hopes that the Federal Reserve might ease gains, as a slide in bank shares dragged Wall Street down on Monday as investors worried about the spread of Silicon Valley bank failures.
SVB Financial (SIVB.O) closed abruptly on Friday after a failed funding round, with investors worried about the risks to other banks from the Federal Reserve’s surge last year. But with many speculating that the central bank may now be less hawkish, 2-year Treasury yields plummeted.
The regulator stepped in over the weekend to restore investor confidence in the banking system, saying SVB depositors would get their money back on Monday.
For some investors, the Fed’s decision next week will also hinge on inflation data due this week.
Timothy Holland, chief information officer at Orion Advisor Solutions, said: “If our consumer price index and producer price index are very bad, the Fed will find itself in a difficult position, or even find itself in a tougher position before these prints. .”
The Dow Jones Industrial Average (.DJI) fell 90.5 points, or 0.28%, to 31,819.14, the S&P 500 (.SPX) fell 5.83 points, or 0.15%, to 3,855.76 and the Nasdaq Composite (.IXIC) gained 49.96 points, or 0.45 %, to 11,188.84.
CPI data will be released on Tuesday, and PPI data will be released on Wednesday.
Defensive utilities (.SPLRCU) rose 1.54%, one of the best performers among the 11 major S&P sectors, while rate-sensitive sectors such as real estate (.SPLRCR) and technology (.SPLRCT) also rose.
“The market is now pricing in that the Fed might not go up this month, so they could go into a pause,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Shares in SVB peer Signature Bank (SBNY.O) were also closed by regulators, who suspended trading in the bank. Nasdaq said they would keep it that way until the exchange “fully satisfies” the request for more information.
President Joe Biden has vowed to do whatever is necessary to address threats to the banking system.
First Republic Bank (FRC.N) fell 61.83% as news of the new financing failed to reassure investors, while Western Alliance Bancorp (WAL.N) and PacWest Bancorp (PACW.O) fell 47.06% and 21.05%, respectively. Stock trading was suspended several times.
Charles Schwab ( SCHW.N ) slammed the S&P 500 after resuming trading after the financial services firm reported a 28% drop in average margin balances in February and a 4% drop in total client assets.
Shares of big U.S. banks including JPMorgan Chase & Co (JPM.N), Citigroup (CN) and Wells Fargo (WFC.N) all fell. The S&P banking index fell 7%, its biggest one-day percentage drop since June 11, 2020.
The Cboe Volatility Index (.VIX), known as Wall Street’s fear gauge, rose 1.72 points to 26.52 after touching 30.81, its highest since late October.
Traders are now largely pricing in a 25 basis point Fed hike for March and are betting the Fed will keep rates at the current level of 44.4%.
Among individual stocks, Pfizer Inc (PFE.N ) rose 1.19% after the drugmaker said it would buy Seagen Inc (SGEN.O) for nearly $43 billion.
Declining issues outnumbered advancing ones on the NYSE by a 2.31-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favored decliners.
The S&P 500 recorded 1 new 52-week high and 48 new lows; the Nasdaq Composite recorded 29 new highs and 526 new lows.
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