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Sunday, April 2, 2023

Wall Street plunged on nervousness caused by the SVB Financial crisis

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Investors fled the market worried about the health of US banksafter regulators had to shut down a high-profile technology lender, dwarfing a February jobs report.

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The S&P 500 lost 56.64 points, or 1.4%, to 3,861.78 points; while The Nasdaq Composite lost 199.20 points, or 1.8%, to 11,139.16.. While, the Dow Jones Industrial Average fell 342.20 points, or 1.1%, to 31,912.66 points.

California banking regulators said they shut down SVB Financial Group to protect deposits in the biggest bank failure since the financial crisis. The SVB capital crisis had already put pressure on bank shares globally.

SVB had tried unsuccessfully to shore up its balance sheet through a proposed share sale late on Wednesday. On the same day, cryptocurrency lender Silvergate Capital said it would have to shut down after huge losses from the collapse of crypto exchange FTX.

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“There is concern that cracks may be appearing in the financial system as a result of the Federal Reserve’s aggressive rate hikes,” said Carol Schleif, chief investment officer at the BMO family office in Minneapolis, adding: “The fear is whether it’s broader than the bank of an industry and a sector of the economy”.

The KBW regional banking index fell sharply, more than the S&P 500 financial index, which also came under pressure. Investors expected to be more focused on economic data than bank stocks.

Before the opening of the market, the nonfarm payrolls report showed that the US economy added more jobs than expected in Februarywhile average hourly earnings rose 0.2% last month after rising 0.3% in January and unemployment rose to 3.6%.

The data tempered concerns that the Fed could raise rates by 50 basis points at its March meeting after hawkish comments from Fed Chairman Powell this week.

However, “investors were more focused on the uncertainties around the banking system,” said John Praveen, managing director and Co-CIO of Paleo Leon. “Any positive vibes that came out of the labor market report were dwarfed by the negative vibes from the SVB situation,” Praveen said.

Source: Ambito

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