Wall Street down, several regional banks in freefall
The New York Stock Exchange was down slightly on Monday, still shaken by the gusts of wind blowing through the banking sector, but limited its losses thanks to the pharmaceutical sector and defensive stocks.
Around 2:20 p.m. GMT, the Dow Jones lost 0.05%, the Nasdaq index lost 0.10% and the broader S&P 500 index, 0.27%.
The indices were in the grip of extreme volatility, oscillating between red and green.
Worried about the gas explosion on the banks, the operators rushed to the assets deemed the safest, first and foremost the US Treasury bonds.
The yield on 10-year US government bonds fell to 3.48%, against 3.69% on Friday at the close. A wave of bond purchases causes their price to rise and their rate to contract, which moves in the opposite direction.
In addition to risk aversion, the easing in bond yields “suggests that the market no longer sees the Fed continuing to raise rates at the pace imagined last week,” according to Quincy Krosby of LPL Financial.
The 2-year rate, more representative of market expectations in terms of monetary policy, tumbled to 4.05%, against 4.58% on Friday, a sharp change which generally only occurs in periods of very strong turbulence on the markets. financial markets.
The prospect of a Fed slowing down to encourage some investors to start buying equities again.
The pharmaceutical sector was in verve, driven by the announcement of the takeover of the biotech Seagen (+15.83%), specializing in cancer treatments, by the pharmaceutical giant Pfizer (+2.04%), for 43 billion of dollars.
Biotech Amgen and Gilead were sought, as were Moderna (+5.09%) or Eli Lilly (+4.19%) laboratories.
In addition, part of the technology sector did well, as did a series of so-called defensive stocks, i.e. theoretically less sensitive to the economic situation, such as Johnson & Johnson (+1.99% ), Procter & Gamble (+2.64%) or Coca-Cola (+1.94%).
But the banking sector remained battered. After the failure of Silicon Valley Bank (SVB) on Friday, another bank, New York’s Signature Bank, was closed by regulators on Sunday, bringing the number of bankrupt institutions to three in less than a week.
The Treasury, the US central bank (Fed) and the Deposit Guarantee Agency (FDIC) have announced that they will guarantee that all SVB and Signature Bank deposits will remain accessible to customers. The Fed is preparing to lend to any bank that needs it to honor withdrawals.
They are “trying to restore confidence, but it doesn’t seem to be working,” commented LPL Fianncial’s Quincy Krosby. “Confidence is eroding in the market. We see this particularly with regional banks.”
At the opening, the Californian establishment First Republic was in dire straits and fell by 73.02%. The San Francisco bank has lost more than three-quarters of its market capitalization since Wednesday.
Despite its status as a regional bank, First Republic is nevertheless the 14th largest financial institution in the United States and weighs more than 212 billion dollars in assets.
She was not alone in the sights of investors. Other regional brands suffered, including Californian PacWest (-54.74%), Western Alliance (-82.47%), headquartered in Phoenix (Arizona) or Zions Bancorporation (-31.60%), of Salt Lake City, Utah.
The fear of the fire spreading to other establishments tensed the entire New York place. “Contagion is absolute fear,” said Quincy Krosby.
“We will also scrutinize the largest banks and insurers,” said the analyst. “There seems to be some concern on that side as well. If this continues, it will mean that investors are getting rid of what affects financial institutions.”
Without dropping in the proportions of certain regional brands, Bank of America (-5.07%), Wells Fargo (-5.62%) or Citigroup (-5.44%) took on water.
“The problem is not solved at all, at least in the spirit of the market”, abounded, in a note, Patrick O’Hare, of Briefing.com.
The VIX index, which measures market volatility, soared to a more than four-month high on Monday.