Diamond Sports Group, which operates regional sports networks that televise nearly half of all MLB, NBA and NHL games, filed for Chapter 11 bankruptcy protection Tuesday.
Diamond is owned by Sinclair Broadcasting Group Inc. SBGI, and operates its networks under the Bally Sports name.
In a statement Tuesday, Diamond said it was finalizing a…
U.S. stocks finished sharply higher Tuesday, with the Dow Jones Industrial Average snapping a five-day losing streak as regional banking stocks rose and investors weighed a report showing the rate of inflation slowed over the past year. The Dow DJIA closed about 1.1% higher, while the S&P 500 SPX gained 1.7% and the Nasdaq Composite COMP rose 2.1%, according to preliminary data from FactSet. Fresh data from the consumer-price index on Tuesday showed inflation rose in February in line with expectations, with the year-over-year rate cooling to 6% from 6.4% in January. Meanwhile, shares of regional banks such as First Republic…
The U.S. European Command said Tuesday that two Russian fighter jets conducted an “unsafe and unprofessional” intercept of an American drone over the Black Sea, striking the unmanned aircraft’s propeller so U.S. forces had to bring the drone down. White House spokesman John Kirby told reporters that it’s not uncommon for there to be intercepts by Russian aircraft of U.S. aircraft over the Black Sea, but Tuesday’s incident is noteworthy because of how unsafe and unprofessional it was.
Shareholders of AMC Entertainment Holdings Inc. voted overwhelmingly in support of the company’s proposal to convert AMC Preferred Equity units into shares of common stock Tuesday.
AMC’s AMC stock, which was repeatedly halted for volatility Monday, fell 13.8%. APEs APE rose 9.3%.
In January, AMC announced the special meeting of shareholders…
While some of the hardest-hit regional bank stocks are posting record one-day rallies, the gains look a bit less impressive when compared with the beating they took over the previous three sessions. Shares of First Republic Bank FRC rocketed $18.05, or 57.8%, in morning trading Tuesday, which was more than quadruple the percentage of their previous record one-day rally of 12.9% on March 17, 2020. But considering the stock had plummeted $83,79, or 72.9%, over the previous three sessions in the wake of recent bank failures, Tuesday’s bounce has retraced just 21.5% of that selloff. Among other big bouncers, shares of Western…
Shares of regional banks posted big gains on Tuesday as they regained their footing after huge losses in the previous session, but volatility continued in the sector following the demise of Silicon Valley Bank, Signature Bank and Silvergate Capital in the past week.
While the rise in some cases is eye-popping, most stocks have yet to recover fully from losses in the past few days. Most stocks are trading well below their levels from a week ago, even with Tuesday’s gains.
Among…
By Joshua Kirby
Credit Suisse Group AG on Tuesday published its annual report for last year, and confirmed previous years’ financial results, after a delay amid discussions requested by the U.S. Securities and Exchange Commission.
The Swiss lender had been due to release the report last week, but delayed the publication following a request…
Rivian Automotive Inc.’s stock fell more than 3% Monday after news that the electric-vehicle maker and Amazon.com Inc. are discussing possible changes to their deal for electric delivery vans.
Citing people familiar with the matter, the Wall Street Journal reported Monday that the companies are in talks to end the exclusivity part of their electric-van deal. The talks started after Amazon’s order for the year was at the low end of the previous range, the report said.
A…
The Biden administration approved the large-scale and controversial Willow drilling project for ConocoPhillips on Alaska’s oil-rich North Slope on Monday.
The approval, although with some conditions, is one of President Joe Biden’s most consequential climate choices of his first administration.
It’s a blemish, say environmental groups, to…
Trading in shares of First Republic Bank and Western Alliance Bancorp ended sharply lower in a tough day of trading for regional banks as fears over bank solvency persisted following the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital.
Stocks were periodically halted or paused for trading amid the bank stock bloodbath, which saw many suffering percentage declines well into the double digits. Typically, bank stocks are stable compared with sectors such as technology, with daily moves above 5% being relatively…
U.S. stocks opened lower Monday after the government took steps to support the banking system after the collapse of Silicon Valley Bank on Friday sparked contagion fears. The Dow Jones Industrial Average
DJIA,
was down 0.7% soon after the opening bell, while the S&P 500
SPX,
fell 1% and the technology-heavy Nasdaq Composite
COMP,
shed 0.8%, according to FactSet data, at last check. The Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement Sunday that they are “taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system.” They said Silicon Valley Bank depositors will have access to “all of their money” starting Monday. Depositors at New York-based Signature Bank, a crypto-friendly institution closed by regulators on Sunday, also will be “made whole,” according to the joint statement, citing a “similar systemic risk exception. ”The Fed said Sunday that it created a Bank Term Funding Program to “help assure banks have the ability to meet the needs of all their depositors.”
Bond yields fell sharply on Monday as investors bet that the failures of Silicon Valley Bank and Signature Bank would cause the Federal Reserve to raise borrowing costs more slowly as it battles inflation.
The monetary policy-sensitive 2-year Treasury yield plunged at one stage early on Monday by more than 40 basis points as investors made bets that worries about the banking system in the wake of the collapse of SVB
SIVB,
and Signature Bank
SBNY,
would force the Federal Reserve to slow the pace of interest rate rises.
The 2-year yield, which just last Thursday was trading above 5%, a 15-year high, dropped below 4.2%.
Markets are pricing in a 95.2% probability that the Fed will raise interest rates by another 25 basis points to a range of 4.75% to 5.0% after its meeting on March 22nd, according to the CME FedWatch tool.
Just last week the chances of a 50 basis point hike were priced at 70%, and now they are zero.
The central bank is expected to take its Fed funds rate target to 4.93% by July 2023, according to 30-day Fed Funds futures. Several days ago the so-called terminal rate was expected to be above 5.6% in October.
The MOVE index, which measures expected volatility in the Treasury market, sits at 140, its highest in 2023 and up 40% since the start of February.
“The Fed may now find itself between a rock and a hard place. It wants to tighten policy to keep a lid on inflation but will now face questions as to whether policy is already too tight, given this nasty wobble in the banking system and the pressure higher rates are already putting on many companies’ cash flows,” said Russ Mould, AJ Bell investment director.
“If nothing else, this is a reminder that the Fed may not find it easy to extricate itself from more than a decade of record-low interest rates and $7 trillion of quantitative rasing (around a quarter of U.S. GDP) without something breaking somewhere. Money was cheap and tossed around with abandon as a result of the zero cost associated with it. Now markets are going through a journey once more to discover what is the cost of money, some of that prior reckless abandon could lead to trouble.”
“For all of the Fed’s efforts to tighten, the Fed Funds rate is still below where it was before the Great Financial Crisis started in 2007 and the central bank may yet struggle to get back there, if the SVB drama is anything like a reliable guide,” Mould concluded.
U.S. regulators came to the rescue of Silicon Valley Bank depositors late Sunday, triggering a modest relief rally in stock-index futures.
But investors were left to weigh the outlook for Federal Reserve rate increases after the central bank’s aggressive tightening was flagged by economists and analysts for setting the stage for the second-largest bank failure in U.S. history.
Federal regulators said depositors at Silicon Valley Bank, or SVB, would have access to all deposits on Monday morning. That includes uninsured deposits — those exceeding the FDIC’s $250,000 cap — in a move that analysts said would help avert runs similar to the event that capsized SVB from occurring elsewhere. SVB
SIVB,
stock and bondholders, however, will be wiped out.
Regulators said New York’s Signature Bank was also closed on Sunday and that its depositors would also be made whole.
The Fed also announced a new emergency loan program that it said would help assure banks have the ability to meet the needs of all their depositors.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” President Joe Biden said in a statement Sunday night. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” he said, adding that he will deliver additional comments Monday.
A deal that spared depositors would be expected to let stocks “rally strongly,” said Barry Knapp, managing partner and director of research at Ironsides Macroeconomics, in a phone interview ahead of the announcement Sunday afternoon. Conversely, measures that would have forced depositors to take a hit would have had the potential to spark an ugly reaction, he said.
Futures on the Dow Jones Industrial Average
YM00,
rose 240 points, or 0.8% following the announcement, while S&P 500 futures
ES00,
were up 1% and Nasdaq-100 futures
NQ00,
gained 1.3%.
Investors will also be assessing the fallout to see if it complicates the Federal Reserve’s plans to hike interest rates further and potentially faster than previously expected in its bid to tamp down inflation.
SVB was closed by California regulators on Friday and taken over by the Federal Deposit Insurance Corp. Regulators raced over the weekend to come to a resolution for depositors after uncertainty around SVB triggered a sharp market selloff late last week.
“In what is an already jittery market, the emotional response to a failed bank reawakens our collective muscle memory of the GFC,” Art Hogan, chief market strategist at B. Riley Financial Wealth, told MarketWatch in an email, referring to the 2007-2009 financial crisis. “When the dust settles, we will likely find that SVB is not a ‘systematic’ issue.”
In a statement Sunday, Securities and Exchange Commission Chair Gary Gensler warned that regulators are on the lookout for misconduct: “In times of increased volatility and uncertainty, we at the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly. Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.”
Weekend Snapshot: What’s next for stocks after Silicon Valley Bank collapse as investors await crucial inflation reading
Knapp said a deal that leaves depositors whole would lift the overall market and allow bank stocks, which got hammered last week, to “rip” higher “because they are cheap” and the banking system “as a whole…is in really good shape.”
Banking stocks dropped sharply Thursday, led by shares of regional institutions, and extended their losses Friday. The selloff in bank stocks pulled down the broader market, leaving the S&P 500
SPX,
down 4.6%, nearly wiping out the large-cap benchmark’s early 2023 gains. The Dow
DJIA,
saw a 4.6% weekly fall, while the Nasdaq Composite
COMP,
declined 4.7%.
Investors sold stocks but piled into safe-haven U.S. Treasurys, prompting a sharp retreat in yields, which move opposite to prices.
SVB’s failure is being blamed on a mismatch between assets and liabilities. The bank catered to tech startups and venture-capital firms. Deposits grew rapidly and were placed in long-dated bonds, particularly government-backed mortgage securities. As the Federal Reserve began aggressively raising interest rates roughly a year ago, funding sources for tech startups dried up, putting pressure on deposits. At the same time, Fed rate hikes triggered a historic bond-market selloff, putting a big dent in the value of SVB’s securities holdings.
SVB was forced to sell a large chunk of those holdings at a loss to meet withdrawals, leading it to plan a dilutive share offering that stoked a further run on deposits and ultimately led to its collapse.
See: Silicon Valley Bank is a reminder that ‘things tend to break’ when Fed hikes rates
Meanwhile, the Fed’s newly announced Bank Term Lending Program will make loans of up to 12 months to banks and other depository institutions. In a crucial twist, it will allow the assets used as collateral for those loans to be valued at par, or face value, rather than marked to market. The Fed will also accept collateral at its discount window on the same conditions.
“These are strong moves,” said Paul Ashworth, chief North America economist at Capital Economics, in a note.
By accepting collateral at par rather than marking to market means that banks that have accumulated more than $600 billion in unreazlied losses on held-to-maturity Treasury and mortgage-backed securities portfolios and had failed to hedge interest-rate risk should be able to survive, he said.
“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” Ashworth wrote. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”
Analysts and economists had largely dismissed the notion that SVB’s woes marked a systemic problem in the banking system. Instead, SVB appeared to be a “a rather special case of poor balance-sheet management, holding massive amounts of long-duration bonds funded by short-term liabilities,” said Erik F. Nielsen, group chief economics adviser at UniCredit Bank, in a Sunday note.
Mismanagement aside, the Fed’s rate hikes created an environment that set the stage for problems, analysts said. A deeply inverted yield curve, in which short-dated Treasury yields run sharply above longer-dated Treasurys, amplifies liability and asset mismatches.
The yield on the 2-year note early last week traded more than 100 basis points, or a full percentage point, above the 10-year for the first time since the early 1980s.
“Inverting the yield curve as deeply as they did…there’s going to be more accidents if they continue down that path,” Knapp said. “Push that thing to 150 basis points and see what happens. You’re going to have more blowups.”
Fed-funds futures traders last week moved to price in a more-than-70% chance of an outsize 50-basis-point, or half a percentage point, rise in the benchmark interest rate at the Fed’s March meeting after Chair Jerome Powell told lawmakers that rates would need to move higher than previously anticipated. Expectations swung back to a 25-basis-point, or quarter-point move, as the SVB collapse unfolded, with traders also scaling back expectations for when rates will likely peak.
Meanwhile, a flight to safety saw the yield on the 2-year Treasury note, which had earlier in the week topped 5% for the first time since 2007, end the week down 27.3 basis points at 4.586%.
U.S. regulators came to the rescue of Silicon Valley Bank depositors late Sunday, triggering a modest relief rally in stock-index futures.
But investors were left to weigh the outlook for Federal Reserve rate increases after the central bank’s aggressive tightening was flagged by economists and analysts for setting the stage for the second-largest bank failure in U.S. history.
Federal regulators said depositors at Silicon Valley Bank, or SVB, would have access to all deposits on Monday morning. That includes uninsured deposits — those exceeding the FDIC’s $250,000 cap — in a move that analysts said would help avert runs similar to the event that capsized SVB from occurring elsewhere. SVB
SIVB,
stock and bondholders, however, will be wiped out.
Regulators said New York’s Signature Bank was also closed on Sunday and that its depositors would also be made whole.
The Fed also announced a new emergency loan program that it said would help assure banks have the ability to meet the needs of all their depositors.
A deal that spared depositors would be expected to let stocks “rally strongly,” said Barry Knapp, managing partner and director of research at Ironsides Macroeconomics, in a phone interview ahead of the announcement Sunday afternoon. Conversely, measures that would have forced depositors to take a hit would have had the potential to spark an ugly reaction, he said.
Futures on the Dow Jones Industrial Average
YM00,
rose 240 points, or 0.8% following the announcement, while S&P 500 futures
ES00,
were up 1% and Nasdaq-100 futures
NQ00,
gained 1.3%.
Investors will also be assessing the fallout to see if it complicates the Federal Reserve’s plans to hike interest rates further and potentially faster than previously expected in its bid to tamp down inflation.
SVB was closed by California regulators on Friday and taken over by the Federal Deposit Insurance Corp. Regulators raced over the weekend to come to a resolution for depositors after uncertainty around SVB triggered a sharp market selloff late last week.
“In what is an already jittery market, the emotional response to a failed bank reawakens our collective muscle memory of the GFC,” Art Hogan, chief market strategist at B. Riley Financial Wealth, told MarketWatch in an email, referring to the 2007-2009 financial crisis. “When the dust settles, we will likely find that SVB is not a ‘systematic’ issue.”
In a statement Sunday, Securities and Exchange Commission Chair Gary Gensler warned that regulators are on the lookout for misconduct: “In times of increased volatility and uncertainty, we at the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly. Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.”
Weekend Snapshot: What’s next for stocks after Silicon Valley Bank collapse as investors await crucial inflation reading
Knapp said a deal that leaves depositors whole would lift the overall market and allow bank stocks, which got hammered last week, to “rip” higher “because they are cheap” and the banking system “as a whole…is in really good shape.”
Banking stocks dropped sharply Thursday, led by shares of regional institutions, and extended their losses Friday. The selloff in bank stocks pulled down the broader market, leaving the S&P 500
SPX,
down 4.6%, nearly wiping out the large-cap benchmark’s early 2023 gains. The Dow
DJIA,
saw a 4.6% weekly fall, while the Nasdaq Composite
COMP,
declined 4.7%.
Investors sold stocks but piled into safe-haven U.S. Treasurys, prompting a sharp retreat in yields, which move opposite to prices.
SVB’s failure is being blamed on a mismatch between assets and liabilities. The bank catered to tech startups and venture-capital firms. Deposits grew rapidly and were placed in long-dated bonds, particularly government-backed mortgage securities. As the Federal Reserve began aggressively raising interest rates roughly a year ago, funding sources for tech startups dried up, putting pressure on deposits. At the same time, Fed rate hikes triggered a historic bond-market selloff, putting a big dent in the value of SVB’s securities holdings.
SVB was forced to sell a large chunk of those holdings at a loss to meet withdrawals, leading it to plan a dilutive share offering that stoked a further run on deposits and ultimately led to its collapse.
See: Silicon Valley Bank is a reminder that ‘things tend to break’ when Fed hikes rates
Meanwhile, the Fed’s newly announced Bank Term Lending Program will make loans of up to 12 months to banks and other depository institutions. In a crucial twist, it will allow the assets used as collateral for those loans to be valued at par, or face value, rather than marked to market. The Fed will also accept collateral at its discount window on the same conditions.
“These are strong moves,” said Paul Ashworth, chief North America economist at Capital Economics, in a note.
By accepting collateral at par rather than marking to market means that banks that have accumulated more than $600 billion in unreazlied losses on held-to-maturity Treasury and mortgage-backed securities portfolios and had failed to hedge interest-rate risk should be able to survive, he said.
“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” Ashworth wrote. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”
Analysts and economists had largely dismissed the notion that SVB’s woes marked a systemic problem in the banking system. Instead, SVB appeared to be a “a rather special case of poor balance-sheet management, holding massive amounts of long-duration bonds funded by short-term liabilities,” said Erik F. Nielsen, group chief economics adviser at UniCredit Bank, in a Sunday note.
Mismanagement aside, the Fed’s rate hikes created an environment that set the stage for problems, analysts said. A deeply inverted yield curve, in which short-dated Treasury yields run sharply above longer-dated Treasurys, amplifies liability and asset mismatches.
The yield on the 2-year note early last week traded more than 100 basis points, or a full percentage point, above the 10-year for the first time since the early 1980s.
“Inverting the yield curve as deeply as they did…there’s going to be more accidents if they continue down that path,” Knapp said. “Push that thing to 150 basis points and see what happens. You’re going to have more blowups.”
Fed-funds futures traders last week moved to price in a more-than-70% chance of an outsize 50-basis-point, or half a percentage point, rise in the benchmark interest rate at the Fed’s March meeting after Chair Jerome Powell told lawmakers that rates would need to move higher than previously anticipated. Expectations swung back to a 25-basis-point, or quarter-point move, as the SVB collapse unfolded, with traders also scaling back expectations for when rates will likely peak.
Meanwhile, a flight to safety saw the yield on the 2-year Treasury note, which had earlier in the week topped 5% for the first time since 2007, end the week down 27.3 basis points at 4.586%.
State authorities closed New York-based Signature Bank
SBNY,
on Sunday, after Silicon Valley Bank was shut down by regulators on Friday in the biggest bank failure since the 2008 financial crisis.
All depositors of Signature Bank will be made whole, according to a joint statement by the Department of the Treasury, Federal Reserve and FDIC.
Also see: Silicon Valley Bank depositors will get ‘all of their money,’ regulators say
Signature Bank has been popular among crypto companies, especially after crypto-friendly Silvergate Bank
SI,
said last Wednesday it would close its operations.
Signature Bank provides deposit services for its clients’ digital assets, but does not invest in, does not trade, does not hold on its own balance sheet nor provide custody of digital assets, and does not lend against or make loans collateralized by such assets, the company said.
The Federal Reserve on Sunday also announced a new emergency loan program to bolster the capacity of the banking system.
U.S. equity markets traded higher Sunday afternoon, with the Dow futures
YM00,
up 0.5%, and the S&P 500
ES00,
futures up 0.8%. Futures for the Nasdaq 100
NQ00,
rose 0.9%, according to FactSet data.
Major cryptocurrencies rallied Sunday. Bitcoin
BTCUSD,
surged 6.4% in the past 24 hours to around $21,842 and ether
ETHUSD,
gained 7% to $1,576, according to CoinDesk data.
U.S. financial regulators on Sunday said Silicon Valley Bank customers would have access to all their money on Monday, days after the bank failed.
Announcing new steps, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation said their moves would “ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
The FDIC will be able to complete its resolution of Silicon Valley Bank
SIVB,
“in a manner that fully protects all depositors,” a joint statement said. “Depositors will have access to all of their money starting Monday, March 13,” the statement added, and no losses will be borne by U.S. taxpayers.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” President Joe Biden said in a statement Sunday night. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
Read more: Full text of Treasury, Fed and FDIC joint statement on SVB and Signature Bank
Signature Bank in New York was closed Sunday by its state regulator, the joint announcement said. “All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” said the joint statement.
Read: Crypto-friendly Signature Bank shut down by regulators after collapses of SVB, Silvergate
Separately, the Fed said it would make additional funding available to banks to ensure they meet depositors’ needs through a new “Bank Term Funding Program.”
See: Fed announces new emergency loan program for banks to ease contagion risk from Silicon Valley Bank
Under the new program, banks and other lenders will be able to pledge Treasurys and mortgage-backed securities for cash. Banks can pledge collateral at par.
This will eliminate the need for a bank to quickly sell its assets in times of stress.
The central bank said “it is prepared to address any liquidity pressures that may arise.”
In a separate statement Sunday, Securities and Exchange Commission Chair Gary Gensler said regulators are monitoring markets amid the recent turmoil. and promised to prosecute “any form of misconduct that might threaten investors, capital formation, or the markets more broadly.”
Greg Robb contributed to this story.
It’s all eyes on federal banking regulators as investors sift through the aftermath of last week’s market-rattling collapse of Silicon Valley Bank.
The name of the game — and the key to a near-term market bounce — could be a deal that makes depositors at Silicon Valley Bank, or SVB, whole, analysts said. And efforts by regulators appeared to be focused on soothing worries over the ability of companies to access uninsured deposits — most such deposits exceed the FDIC’s $250,000 cap — in order to prevent runs similar to the event that capsized SVB from occurring elsewhere.
“If a deal gets struck tonight that doesn’t haircut depositors, the market is going to rally strongly,” said Barry Knapp, managing partner and director of research at Ironsides Macroeconomics, in a phone interview Sunday afternoon.
Investors will also be assessing the fallout to see if it complicates the Federal Reserve’s plans to hike interest rates further and potentially faster than previously expected in its bid to tamp down inflation.
SVB was closed by California regulators on Friday and taken over by the Federal Deposit Insurance Corp., which was conducting an auction of the bank Sunday afternoon, according to news reports.
See: U.S. and U.K. regulators consider ways to help SVB depositors, FDIC auctioning assets – reports
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Treasury Secretary Janet Yellen said in a Sunday morning interview on “Face the Nation” on CBS, while ruling out a bailout that would rescue bondholders and shareholders of SVB parent SVB Financial Group SIVB.
“We are concerned about depositors and are focused on trying to meet their needs,” she said.
Continued uncertainty could leave a “sell first, ask questions later” dynamic in effect Monday.
“In what is an already jittery market, the emotional response to a failed bank reawakens our collective muscle memory of the GFC,” Art Hogan, chief market strategist at B. Riley Financial Wealth, told MarketWatch in an email, referring to the 2007-2009 financial crisis. “When the dust settles, we will likely find that SVB is not a ‘systematic’ issue.”
Weekend Snapshot: What’s next for stocks after Silicon Valley Bank collapse as investors await crucial inflation reading
Knapp warned that market turmoil with significant potential downside for stocks could ensue if depositors are forced to take a haircut, likely sparking runs at other institutions. A deal that leaves depositors whole would lift the overall market and allow bank stocks, which got hammered last week, to “rip” higher “because they are cheap” and the banking system “as a whole…is in really good shape.”
Muscle memory, meanwhile, was in effect at the end of last week. Banking stocks dropped sharply Thursday, led by shares of regional institutions, and extended their losses Friday. The selloff in bank stocks pulled down the broader market, leaving the S&P 500
SPX,
down 4.6%, nearly wiping out the large-cap benchmark’s early 2023 gains.
The Dow Jones Industrial Average
DJIA,
saw a 4.6% weekly fall, while the Nasdaq Composite
COMP,
declined 4.7%. Investors sold stocks but piled into safe-haven U.S. Treasurys, prompting a sharp retreat in yields, which move opposite to prices.
SVB’s failure is being blamed on a mismatch between assets and liabilities. The bank catered to tech startups and venture-capital firms. Deposits grew rapidly and were placed in long-dated bonds, particularly government-backed mortgage securities. As the Federal Reserve began aggressively raising interest rates roughly a year ago, funding sources for tech startups dried up, putting pressure on deposits. At the same time, Fed rate hikes triggered a historic bond-market selloff, putting a big dent in the value of SVB’s securities holdings.
See: Silicon Valley Bank is a reminder that ‘things tend to break’ when Fed hikes rates
SVB was forced to sell a large chunk of those holdings at a loss to meet withdrawals, leading it to plan a dilutive share offering that stoked a further run on deposits and ultimately led to its collapse.
Analysts and economists largely dismissed the notion that SVB’s woes marked a systemic problem in the banking system.
Also see: 20 banks that are sitting on huge potential securities losses—as was SVB
Instead, SVB appears to be a “a rather special case of poor balance-sheet management, holding massive amounts of long-duration bonds funded by short-term liabilities,” said Erik F. Nielsen, group chief economics adviser at UniCredit Bank, in a Sunday note.
“I’ll stick my neck out and suggest that markets are vastly overreacting,” he said.
Implications for the Fed’s monetary policy path also loom large. Fed-funds futures traders last week moved to price in a more-than-70% chance of an outsize 50-basis-point, or half a percentage point, rise in the benchmark interest rate at the Fed’s March meeting after Chair Jerome Powell told lawmakers that rates would need to move higher than previously anticipated.
Expectations swung back to a 25-basis-point, or quarter-point move, as the SVB collapse unfolded, with traders also scaling back expectations for when rates will likely peak.
Meanwhile, a flight to safety saw the yield on the 2-year Treasury note, which had earlier in the week topped 5% for the first time since 2007, end the week down 27.3 basis points at 4.586%.
The market reaction wasn’t unusual, said Michael Kramer of Mott Capital Management, in a Sunday note, and should reverse once the situation around SVB calms down.
Powell said incoming economic data would determine the size of the Fed’s next rate move. The market reaction to a stronger-than-expected rise in February nonfarm payrolls, which was tempered by a slowdown in wage growth and a rise in the unemployment rate, was clouded by the tumult around SVB.
“I think they will raise rates by at least 25 basis points and signal that more rate hikes are coming,” Kramer said. “If they were to pause rate hikes unexpectedly, it would send a warning message that they are seeing something of grave concern, causing a significant change in their policy path, and that would not be bullish for stocks.”
Hedge funds are offering to buy startup deposits at Silicon Valley Bank (SVB) for as little as 60 cents on the dollar, Semafor reported on Saturday, citing people familiar with the matter.
Bids range from 60 to 80 cents on the dollar, the report said adding that the range reflects expectations for how much of the uninsured deposits will be eventually recovered once the bank’s assets are sold or wound down.
Firms like Oaktree which are known for investing in distressed debt are contacting startup businesses after SVB’s
SIVB,
seizure by the Federal Deposit Insurance Corp (FDIC), the report said.
Traders from investment bank Jefferies are also contacting startup founders with deposits at the bank, offering to buy their deposit claims at a discount, The Information reported separately.
Jefferies is offering at least 70 cents on the dollar for deposit claims, the report said, citing several people with direct knowledge of the matter.
Oaktree declined to comment on the reports. Jefferies could not be immediately reached for comment.
Silicon Valley Bank was taken over by the U.S. Federal Deposit Insurance Corporation on Friday after depositors, concerned about the lender’s financial health, rushed to withdraw their their deposits. The two-day run on the bank stunned markets, wiping out more than $100 billion in market value for U.S. banks.
See: Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual
Streaming platform Roku Inc.
ROKU,
on Friday said it “does not know” to what extent it would be able to recover the cash it has deposited with the recently-failed Silicon Valley Bank. Roku said it had cash and cash equivalents of around $1.9 billion as of Friday, with around $487 million — or roughly 26% — at the bank. Roku said its deposits with SVB were “largely uninsured.” Shares fell 3.7% after hours.
U.S. stocks suffered their worst weekly rout of the year as another hotter-than-expected jobs number and the first major American bank failure since 2008 sent the major indexes reeling in afternoon trade. Stocks finished lower on Friday, as the Dow Jones Industrial Average fell for the fourth straight session, its longest streak of daily losses since Dec. 19, according to FactSet data. The S&P 500
SPX,
fell by 56.73 points, or 1.5%, to finish Friday’s session at 3,861.59, according to preliminary closing data from FactSet. The large-cap index notched a weekly drop of 4.6%, its biggest such loss since September. The Dow
DJIA,
dropped 345.22 points, or 1.1%, to 31,909.64, bringing its weekly loss to 4.4%. The Nasdaq Composite
COMP,
fell 199.47 points, or 1.8%, to 11,138.89 on Friday, falling 4.7% for the week. Meanwhile, Treasury yields plunged as investors bought back into bonds. The yield on the 2-year note ended down 0.478 percentage points over the last two trading days to 4.586%, its biggest two-day drop since Sept. 14, 2001, according to Dow Jones Market Data.