Dow and S&P 500 in the red on fears of chain reaction in banking system after SVB collapse

(technical replay)

March 13 (Reuters) – U.S. stock indexes Dow and S&P 500 fell on Monday amid growing fears of a crisis spreading after the collapse of Silicon Valley Bank (SVB) and the suspension of securities trading by several banks. Expectations for an interest rate hike by the Fed weakened in March.

The abrupt shutdown of SVB Financial on Friday after a failed capital raise raised fears of risk to other banks amid the sharpest cycle of Federal Reserve rate hikes since the early 1980s.

US officials took a series of emergency measures on Sunday to bolster confidence in the banking system after the collapse of a Silicon Valley bank threatened a wider financial crisis.

“When such a big step is taken and at such a fast pace, the first thought is that the crisis has been averted. But the second thought – how big was this crisis, how big were the threats through which you had to take this step? – said Rick Mekler from Cherry Lane Investments.

“The only positive I’ve heard for the markets is the belief that (the current banking environment) will slow rate hikes as the Fed tries to avoid further damage to the financial sector.”

US President Joe Biden said his administration’s swift action to support depositors at two US banks should reassure US residents that the banking system is safe.

Trading at Signature Bank, which was shut down by regulators on Sunday, was suspended along with SVB.

First Republic Bank shares fell more than 77% by 5:31 p.m. Moscow time, while Charles Schwab shares fell 19.6% after trading was suspended.

Western Alliance Bancorp, PacWest Bancorp and Charles Schwab trading was suspended again after falling 83.7%, 55.3% and 19% by 1726 GMT.

Shares of large US banks, including JPMorgan Chase & Co, Morgan Stanley and Bank of America, fell from 1.44% to 4.54%.

Traders now believe there is a 50% chance the Fed will not raise interest rates at its next meeting while allowing borrowing costs to fall in the second half of the year.

It is expected that the interest rate limit will be reached in March at the level of 4.65% against the September forecast of the debt peak at around 5.5%.

Investment bank Goldman Sachs analysts said on Sunday that they no longer expect the US Federal Reserve to raise interest rates at its March 21-22 meeting.

The focus of investors’ attention is now the publication of inflation data on Tuesday, which may suggest further steps by the Fed in tightening monetary policy.

The Dow Jones fell 0.15% to 31,862.91, the S&P 500 fell 0.31% to 3,849.52, and the Nasdaq held steady at 11,139.55.

Pfizer Inc shares rose 1.74% after the drugmaker said it would buy Seagen Inc for nearly $43 billion.

The original message in English is available at the code: (Amruta Khandekar and Shristi Achar A featuring Shubham Batra in Bangalore)


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