Volatility Rocks Dow Jones; Gold, Bitcoin Rise Amid Bank Run Fears; Analysts see interest rate freezes as the bank’s crater
The Dow Jones Industrial Average crossed the flat line early Monday after last week’s steep selloff. Investors are on high alert against the banking crisis, triggered by last week’s SVB collapse. Depositors in the closed bank now have access to their money through an FDIC bridge bank set up with “normal banking hours and activities, including online banking.”
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Crash of crypto firm Silvergate (SI) contributed to market woes while regulators also shut down Signature bank (SBNY), the third largest US bank, which also had significant crypto exposure. Crypto exchange Coin base (COIN) stated that it had $240 million in cash with Signature Bank.
Depositors will get their money back under the “systemic risk exemption” rules that also cover SBNY.
Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chair Martin Gruenberg stated that any loss to the FDIC as a result of supporting depositors who had more than the $250,000 limit would be recovered “at a special assessment of banks, as required by law” . Shareholders will not be protected.
To stem any risk of contagion, a new “Bank Term Funding Program” will offer loans of up to one year to FDIC member banks, backed by US Treasury bonds.
Dow Jones leader JPMorgan Chase (JPM) fell while Bank of America (BAC) plunged. Charles Schwab (SCHW) plunged despite an upgrade from Citibank analyst Chris Alan from neutral to buy with a price target of 75. Regional bank First Republic (FRC) cratered over 60%. The SPDR S&P Regional Banking ETF (KRE) also lost ground.
Healthcare shares UnitedHealth Group (UNH) and Johnson & Johnson (JNJ) outperformed in Dow as well as defensive plays Walmart (WMT) and Home Depot (HD).
The yield on the benchmark 10-year Treasury note fell 19 basis points to 3.50% as safe-haven investors drove prices higher. Gold and Bitcoin rose. The S&P volatility index rose 16 percent to a five-month high near 30.
Financial data, analysts’ assessment
The inflation figures for Tuesday and Wednesday are also on alert. Analysts expect inflation to slow to 6.0% from January’s 6.1%. The odds of a 25 basis point hike in March are 47.6%, according to the CME FedWatch Tool. But analysts know Goldman Sachs (GS) believes that the Fed will pause rate hikes at the meeting. The dollar fell on Monday.
The S&P 500 fell slightly in morning trading. The real estate, healthcare and utilities sectors increased.
Shares of Tesla ( TSLA ) fell after Wolfe Research analyst Rod Lache downgraded the stock to hold from buy without changing his 185 price target for EV stock.
The Nasdaq was largely unchanged. Shares of Illumina (ILMN) led with big gains. Activist investor Carl Icahn is bidding for three seats on the company’s board, according to the Wall Street Journal. Modern (mRNA) and Regeneron Pharmaceuticals (RAIN) also rose during the hour.
Volume rose on the Nasdaq and was unchanged on the NYSE compared to the same time on Friday.
Crude oil plunged nearly 3% to trade at $74.73 a barrel.
Shares today move outside the Dow Jones
Insole (PODD) rose as it moved up to replace SIVB in the S&P 500 index. The sea (SGEN) rose as Pfizer (PFE) announced plans to buy the biotech giant for $43 billion.
Earnings continue this week with reports from Array technologies (ARRY), Catalyst Pharma (CPRX), Five under (FIVE), FedEx (FDX), Adobe (ADBE) and Dollar General (DG). ARRY, FDX and FIVE fell while CPRX and DG rose.
Palo Alto Networks (PANW) is on alert as it holds its 21-day line. Iridium Communications (IRDM) retook its 50-day line. Both are on the IBD Leaderboard.
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