U.S. stocks are enjoying an extremely volatile start to the new trading week. Investors are seeking shelter in gold and government bonds after the Silicon Valley Bank (NASDAQ:SIVB) collapsed
making it the biggest bank failure in the U.S. in 15 years. On the other hand, stocks pared gains after surging in pre-market Monday trading
The S&P 500 closed over 4.5% lower last week, the biggest weekly decline since last September. Dow Jones Industrial Average lost about 4.4% while Nasdaq 100 fell 3.75%
The Q4 2022 earnings season is almost fully completed now with FactSet estimating that the S&P 500 earnings declined 6.1%,
which would be the largest decline since Q2 2020. On the valuation front, the forward 12-month P/E ratio for the S&P 500 is 17.2 as of Friday.
Are banks out of the woods yet? U.S. regulators approved plans over the weekend to backstop all uninsured deposits with Silicon Valley Bank and Signature Bank (NASDAQ:SBNY).
Moreover, the Fed and Treasury launched the Bank Term Funding Program (BTFP) to shore up liquidity
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,”
said a joint statement from Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.
The program is funded via the Treasury’s Exchange Stabilization Fund (ESF), which has a net balance of $38 billion.
Both of these steps are likely to increase confidence among depositors, though they stop short of an FDIC guarantee of uninsured accounts as was implemented in 2008,” according to Goldman Sachs economists.
Markets reacted to these developments positively with the futures opening higher on Sunday afternoon. However, these gains were quickly pared after analysts warned that the bounce may be short-lived.