The stock market is feeling relieved as rate hikes look smaller


The stock market’s main indices continued their turbulent action, hitting highs in afternoon trading Monday after the session. Investors felt reassured that the Fed is unlikely to hike rates as quickly as expected as the banking crisis continued.


Three banks have failed in the past few days. crypto bank silver gate (SI), SVB Finance‘s (SIVB) Silicon Valley Bank and signature bank (SBNY) faced runs on their deposits.

The closure of Silicon Valley Bank 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. The bridge bank 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 quick 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 9.5%.

The US 10-year Treasury yield slipped 20 basis points to 3.51% as investors fled to lower-risk assets. The 10-year bond experienced its biggest 3-day yield decline since November 20, 2008 during this financial crisis.

The 2-year Treasury yield fell to 4.16% earlier today. The drop represents the largest one-day drop since September 15, 2008, and the largest three-day drop since October 22, 1987.

The CME FedWatch tool now sees a 70 percent chance of a 25 basis point rate hike at the March Federal Reserve meeting.

Volume on NYSE and Nasdaq was higher than same time of day on Friday.

Major stock market indices are having a wild ride

The Dow Jones Industrial Average rose 0.3%. The S&P 500 rose 0.4%. The best performer was the Nasdaq Composite, which recaptured 1%. Small-cap Russell 2000 was the worst performer, down 1.5%, weighed down by its 15% bank component.

Dow, Nasdaq and S&P 500 remain below their 50-day and 200-day moving averages.

The tech-heavy Invesco QQQ Trust ETF (QQQ), which tracks the Nasdaq 100, gained 1%. Innovator IBD 50 ETF (FFTY) fell 1%.

Crude oil fell 2.4% to $74.87 a barrel.

Gold futures were up 2.6% to $1,916. The SPDR Gold Trust ETF (GLD) gained 2.2% as investors looked elsewhere for a place to put their money.

The dollar fell against major currencies as banking problems reduced the likelihood of higher interest rates. The US currency tends to follow movements in Treasury yields.

The WSJ Dollar Index, which tracks the dollar against a basket of currencies, fell 1%. Invesco DB US Dollar Bullish (UUP) is down almost 1% after facing resistance at the 200-day moving average last week.

Bitcoin futures surged 20.4% to $24,040 as investors looked for other assets and banks that cater to crypto customers received federal aid.

Stock market problems: The sell-off of bank stocks continues

Bank of the First Republic (FRC) plunged another 63% to continue its sell-off on liquidity concerns after trading temporarily halted earlier in the session. The regional bank crashed off and on despite bailouts from the Federal Reserve JPMorgan Chase (JPM).

signature bank (SBNY) fell another 5.9% after regulators took over the bank on Sunday, making it the third-biggest bank failure. Landesbank Western Alliance Bancorp (WAL) fell more than 48% as regional banks saw more weakness.

The SPDR Select Regional Bank ETF (KRE) lost 11.7% as the sector sold off. SPDR Select Financial ETF (XLF) fell 3.5%.

Karl Schwab (SCHW) pared losses to around 10% after the stock halted trading. Citigroup gave Schwab a buy rating from neutral despite the negative stock move.

Other stockbrokers

blessings (SGEN) up over 15% on news Pfizer (PFE) will acquire the cancer treatment developer for approximately $43 billion. PFE rose 1.8% following the news.

Follow Kimberley Koenig on Twitter for more stock news @IBD_KKönig.


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