Investors are expressing concerns about the health of the banking sector, which has caused U.S. stocks to plummet. At 10:42 Eastern Time (14:42 Greenwich Mean Time), the Dow Jones Industrial Average had declined by 391 points or 1.2%, while the S&P 500 fell by 1.1% and the NASDAQ Composite decreased by 0.7%. This anxiety was triggered by SVB Financial filing for bankruptcy protection after its Silicon Valley Bank experienced a run on deposits, forcing regulators to shut it down.
SVB Financial’s parent company is now considering strategic alternatives for its broker-dealer and venture capital arms, which were not part of the filing. The filing also comes after a group of major banks deposited $30 billion in uninsured funds at First Republic Bank, which had been caught up in the sharp selloff of banking stocks since Silicon Valley Bank‘s collapse last week. Following this move, First Republic suspended its dividend and saw its shares plummet by 23% on Friday.
This banking sector shakeout could give the Federal Reserve cause for caution when considering interest rates at next week’s policy meeting. Prior to SVB’s difficulties, it was expected that the Fed would raise rates by half a percentage point, as Chair Jerome Powell informed Congress that the fight against inflation was ongoing. However, the pressure on small and regional banks could result in a contraction of lending, which would impede economic growth. As a result, the Fed may choose to raise rates less aggressively. Futures traders anticipate a quarter of a percentage point hike at present.
In other news, the University of Michigan’s consumer sentiment for March decreased to 63.4, which was lower than expectations and the 67 prior reading. Meanwhile, FedEx Corporation (NYSE:FDX) experienced a 7.8% increase in its share price after the logistics giant raised its outlook for the full year as cost-cutting measures began to take effect.
Oil prices continued to fall, with Crude Oil WTI Futures dropping by 3% to $66.33 a barrel and Brent Oil Futures crude decreasing by 2.8% to $72.53 a barrel. On the other hand, Gold Futures rose by 2.2% to $1,965.
Investors are currently expressing concerns about the banking sector, and this has caused the U.S. stock market to decline. The Federal Reserve is likely to approach interest rates with caution due to the shakeout in the banking sector, which could result in a contraction of lending and slower economic growth. Meanwhile, other factors, such as the decrease in oil prices and the increase in gold prices, also have an impact on the market.
