U.S. stock indexes fell on Monday as the Silicon Valley Bank bankruptcy stoked fears of contagion with trading halted at several banks, as expectations rose for a pause in bulls Federal Reserve interest rates in March.
* The sudden collapse of SVB Financial on Friday, following a failed capital raise, raised concerns about risks to other banks from the Fed’s steepest rate hike cycle since the early 1980s .
* Over the weekend, regulators stepped in to restore investor confidence in the banking system, saying SVB depositors will have access to their funds on Monday.
* “When you take such a big and fast step, the first thing you think of is that the crisis has been averted. But the second thought is: how big was this crisis, what were the risks it took take this step?” said Rick Meckler, partner at Cherry Lane Investments.
* “The only bright spot for the markets that I have heard coming out of this is the belief that it will slow rate hikes as the Fed looks to avoid further damage to the financial sector,” he added.
* Trading in Signature Bank, which was shut down by regulators on Sunday, was halted.
* First Republic Bank fell 65.1% as news of new funding failed to reassure investors, while Western Alliance Bancorp, PacWest Bancorp and Charles Schwab lost 75.9%, 41% and 19% respectively . Trading in the securities has been halted several times due to volatility.
* Shares of major US banks such as JPMorgan Chase & Co, Morgan Stanley and Bank of America fell between 2.8% and 6.3%. The KBW regional banking index fell 11.2%, while the S&P 500 banking index fell 7.7%.
* The Dow Jones Industrial Average fell 120.81 points, or 0.38%, to 31,788.83; The S&P 500 index fell 43.09 points, or 1.12%, to 3,818.50; the Nasdaq Composite fell 121.04 points, or 1.09%, to 11,017.85.
* The benchmark S&P 500 has erased all of its gains so far this year as the SVB’s tumble weighed on investor sentiment, already weakened by fears the Fed could raise rates at its March meeting next week.