- Trading was intermittently halted on at least 20 regional banks as the velocity of money forced regulators to intervene as fear gripped Wall Street
- Sell-off hit the Big Four trillion-dollar banks: Citigroup’s share price dived 7.45%, Wells Fargo sank 7.1%, Bank of America plunged 5.8% and JP Morgan fell 1.8%
- Former Trump staffer Steve Moore warned: ‘The system is sound, but I do think you have a lot of major banks that are in some trouble’
By ROSS IBBETSON FOR DAILYMAIL.COM
PUBLISHED: 17:03 EDT, 13 March 2023 | UPDATED: 17:37 EDT, 13 March 2023
More than $100 billion was wiped off US banks’ value today in a bloodbath on Wall Street sparked by the collapse of Silicon Valley Bank.
Trading was intermittently halted on at least 20 regional banks as the velocity of money forced regulators to intervene. The Big Four of US banks were also drawn into the bloodletting. Citigroup’s share price dived 7.45 percent, Wells Fargo sank 7.1 percent, Bank of America plunged 5.8 percent and JP Morgan fell 1.8 percent.
Among the worst affected regional banks were First Republic which fell by 62 percent, Western Alliance which closed with a loss of 47 percent and KeyCorp which dropped by 21 percent.
The declines struck the Street despite Joe Biden making an intervention minutes before the market opened to claim that ‘Americans can have confidence that the banking system is safe’.
Former Trump White House adviser Steve Moore warned that SVB ‘may just be the tip of the iceberg’, exposing a broader weakness brought about by Biden’s $4trillion COVID stimulus package.
SVB’s sudden collapse Friday – the second-largest ever by a US bank – struck when investors frantically started withdrawing funds amid fears it could no longer keep pace with the Fed’s rate hikes.
Moore told Fox News: ‘I think it’s important for people to understand how this potential banking crisis happened. It’s not because there aren’t enough bank regulators, as Biden is trying to say.
‘It’s because of the massive inflation and the trillions and trillions of dollars of borrowing that the federal government has done that has put our financial system in great jeopardy and great peril.
‘You can’t just keep doing this month after month, year after year, borrowing trillions and trillions of dollars. And so what happened, because of the Biden spending and debt policies, is that not only did inflation go up, but interest rates have gone up.’
He said the Fed had already raised interest rates multiple times throughout 2022 and has signaled that intends to continue doing so to cool the overheated economy.
‘That’s caused a lot of financial problems for these big banks is the interest rates go up,’ Harris added.
But many speculated the central bank could now become less hawkish, and the yield on the 2-year Treasury tumbled.
Regulators over the weekend stepped in to restore investor confidence in the banking system, saying SVB’s depositors will have access to their funds on Monday.
To some investors, the Fed’s decision next week will also hinge on inflation data due this week.
‘If we get shockingly bad Consumer Price Index and Producer Price Index, the Fed is going to find itself in a tough spot or a much tougher spot that it even finds itself in ahead of those prints,’ said Orion Advisor Solutions CIO Timothy Holland.
According to preliminary data, the S&P 500 lost 5.82 points, or 0.16%, to end at 3,855.54 points, while the Nasdaq Composite gained 49.74 points, or 0.45%, to 11,188.63. The Dow Jones Industrial Average fell 86.66 points, or 0.27%, to 31,822.08.
The benchmark S&P 500 is now up about 1% for the year so far. Earlier in the session it fell, briefly erasing all the year-to-date gains.
The CPI data is due on Tuesday and PPI on Wednesday.
The defensive utilities sector was among the best performing of the 11 major S&P sectors while interest rate sensitive groups such as real estate and technology also climbed.
‘The market is now expecting that the Fed is likely to not raise rates this month and so they may enter a pause period,’ said Peter Cardillo, chief market economist at Spartan Capital Securities.
Shares of SVB’s peer Signature Bank, which was also shut down by regulators, were halted. Nasdaq said they would remain so until the exchange’s request for additional information was ‘fully satisfied.’
Biden vowed to do whatever was needed to address the threat to the banking system.
First Republic Bank fell sharply as news of fresh financing failed to reassure investors, and so did Western Alliance Bancorp and PacWest Bancorp. Trading in the stocks was halted several times.
Weighing on the S&P 500, Charles Schwab tumbled upon resuming trade after the financial services company reported a 28% decline in average margin balances and a 4% fall in total client assets for February.
The CBOE Volatility Index, known as Wall Street’s fear gauge, ticked higher.
Traders are now largely pricing in a 25 basis point rate hike from the Fed in March, with bets that the central bank will hold interest rates at their current level standing at 31.4%.
Among individual stocks, Pfizer Inc was up after the drugmaker said it would buy Seagen Inc for nearly $43 billion.