The Dow Jones Industrial Average crisscrossed the flatline early Monday after last week’s steep sell-off. Investors are on high alert to the banking crisis, triggered by last week’s SVB collapse. Depositors at the closed bank now have access to their money through an FDIC bridge bank created with “normal banking hours and activities, including online banking.”
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The crash of crypto firm Silvergate (SI) added to market woes while regulators also closed Signature Bank (SBNY), the third largest U.S. bank, which also held significant crypto exposure. Crypto exchange Coinbase (COIN) stated it had $240 million in cash with Signature Bank.
Depositors will have their money back under the “systemic risk exemption” rules that cover SBNY as well.
Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chair Martin Gruenberg stated that any loss to FDIC as a result of supporting depositors who had more than the $250,000 limit will be recovered “by a special assessment on banks, as required by law.” Shareholders will not be protected.
Backstopping some risks of contagion, a new “Bank Term Funding Program” will offer loans of up to one year to FDIC member banks, backed by U.S. Treasuries.
Dow Jones leader JPMorgan Chase (JPM) fell while Bank of America (BAC) plunged. Charles Schwab (SCHW) dived despite an upgrade from Citibank analyst Chris Alan from neutral to buy with a 75 price target. Regional bank First Republic (FRC) cratered over 60%. The SPDR S&P Regional Banking ETF (KRE) also lost ground.
Health care stocks UnitedHealth Group (UNH) and Johnson & Johnson (JNJ) fared better in the Dow as well as defensive plays Walmart (WMT) and Home Depot (HD).
The yield on the benchmark 10-year Treasury note dropped 19 basis points to 3.50% as investors seeking safe haven drove prices higher. Gold and Bitcoin rose. The S&P Volatility Index surged 16% to a five-month high near 30.
Economic Data, Analysts’ Take
Tuesday and Wednesday inflation numbers are on watch as well. Analysts expect inflation to ease to 6.0% from January’s 6.1%. Odds for a 25 basis point hike in March stand at 47.6%, according to the CME FedWatch Tool. However, analysts at Goldman Sachs (GS) believe the Fed will pause rate hikes at the meeting. The dollar dipped on Monday.
The S&P 500 fell slightly in morning trading. Real estate, health care and utilities sectors gained.
Shares of Tesla (TSLA) fell after Wolfe Research analyst Rod Lache downgraded the stock to hold from buy while not changing the price target of 185 for the EV stock.
The Nasdaq was mostly unchanged. Shares of Illumina (ILMN) led with hefty gains. Activist investor Carl Icahn is bidding for three seats on the company’s board, according to Wall Street Journal reports. Moderna (MRNA) and Regeneron Pharmaceuticals (REGN) also rose at the hour.
Volume rose on the Nasdaq and was unchanged on the NYSE compared to the same time on Friday.
Crude oil dived nearly 3% to trade at $74.73 per barrel.
Stocks Moving Today Outside Dow Jones
Insulet (PODD) rose as it stepped up to replace SIVB in the S&P 500 index. Seagen (SGEN) soared 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 Below (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 watch as it holds its 21-day line. Iridium Communications (IRDM) retook its 50-day line. Both are on IBD Leaderboard.
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