A tumultuous week in U.S. financial markets ended on an uncertain note on Friday after a massive injection of $30 billion in deposits from major banks into First Republic Bank failed to calm investors.
Last week, the sudden collapse of three US banks – Silvergate Capital, Signature Bank
SBNY
and Silicon Valley Bank – began to rekindle concerns about weakness in the banking sector amid significantly higher interest rates.
SVB Financial Group
SIVB
Friday filed for Chapter 11 bankruptcy and said it would seek a court-supervised reorganization. Silicon Valley Bank has been placed in federal receivership following a run on its deposits.
Within days, other regional banks and financial firms were swept up in the sell-off.
Bank of the First Republic
FRC
,
another mid-sized California bank, saw its stock price hit an intraday record low this week, before the bank was promised a pledge of $30 billion in deposits from a group of the country’s largest banks , including JPMorgan Chase
JPM
,
Bank of America
BAC
,
Wells Fargo
WFC
and Citigroup
VS
.
In Europe, shares of Swiss banking giant Credit Suisse
CS
fell to around $2 a share in New York trading. The bank on Thursday announced plans to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank to boost its liquidity. Shares of the bank in New York were down 33.9% on the year to Friday.
Here’s a look at the big swings in the financial markets over the past week.
SPDR S&P Regional Banking ETF Shares
CREATE
,
which covers the regional bank segment of the broader S&P 500 index, has fallen 24.5% in the past seven trading days since March 9, a day after SVB announced it had sold a portfolio of securities with a loss of more than a billion dollars. Depositors began fleeing and the bank was shut down by regulators on March 10.
The Treasury, FDIC and Federal Reserve on Sunday announced guarantees for all deposits at Silicon Valley Bank and Signature Bank to bolster confidence in the banking industry.
Shares of the SPDR S&P Regional Banking ETF fell 6% on Friday. Shares of First Republic Bank fell 32.8% after a $30 billion inflow of deposits failed to calm jittery investors.
A sell-off in bank stocks sent the entire stock market tumbling, leaving the S&P 500 index
SPX
down 2.1% since March 9 and briefly wiping out the large-cap benchmark’s early 2023 gains.
The S&P 500 ended down 1.1% on Friday, but gained 1.4% for the week, according to Dow Jones Market Data. It was up 2% for the year as of Friday.
The Nasdaq Composite Index
COMP
outperformed the Dow Jones Industrial Average by 4.45 percentage points this week, its strongest weekly outperformance since March 20, 2020, according to Dow Jones Market Data.
The jump in the biggest names in technology and semiconductors helped limit losses on the Nasdaq 100 index, which tracks the top 100 technology companies on the Nasdaq Stock Exchange.
The Nasdaq Composite Index
COMP
ended lower on Friday, but posted a weekly gain of 4.4%, while the Dow Jones Industrial Average
DJIA
was down 0.2% for the week.
See: Microsoft, Apple and Meta outperform as investors seek safety in megacap tech stocks
The bond market also had a week of extremes. The return on the 2-year Treasury bond
TMUBMUSD02Y
fell 74 basis points, the biggest weekly decline since October 1987, a period marked by the Black Monday stock market crash, according to Dow Jones Market Data.
See: Why bond market volatility is at its highest since the 2008 financial crisis amid continued bank fallout
Adding to its swings, the February CPI report showed little progress on cooling high inflation, which failed to subside until the weekend. The policy-sensitive 2-year Treasury yield fell 28.4 basis points to 3.846% on Friday. It was the lowest level since September 14, 2022.
Trading in the federal futures market was also choppy, with odds on Friday showing a 40% chance of no Fed rate hike at its meeting next week and a 60% chance that policymakers will hike rates an additional 25 basis points within a range. from 4.75% to 5%, according to the CME tool FedWatch.
Gold prices jumped 8.1% in the past seven trading days, ending Friday at their highest level in 11 months and booking their best weekly gain in nearly three years, according to Dow Jones Market Data. Fears of further strains in the banking sector weighed on investor sentiment, bolstering the yellow metal’s appeal as a safe haven.
Gold futures for April delivery
GC00
GCJ23
gained $50.50, or 2.6%, to settle at $1,973.50 an ounce on the Comex on Friday, with the most active contract up 5.7% for the week. It was the highest settlement for the yellow metal since April 18, 2022 and its biggest weekly advance since April 2020, according to Dow Jones Market Data.
The ICE US Dollar Index
DXY
,
an indicator of the greenback’s strength against a basket of rivals, down 1.5% since last Thursday. The dollar also closely follows the movements of the 2-year yield.
The dollar index rebounded on Wednesday morning as Credit Suisse’s liquidity concerns reignited worries about risks in the global banking system, triggering safe-haven dollar buying.
Oil futures fell, with the most active U.S. contract ending at a 15-month low and posting its biggest weekly decline in nine months, according to Dow Jones Market Data.
Benchmark US crude West Texas Intermediate for April delivery
CL00
CL.1
CLJ23
fell $1.61, or 2.4%, to settle at $66.74 a barrel on the New York Mercantile Exchange, leaving the contract with a weekly loss of 13%, according to Dow Jones Market Data.
The contract is down 14.2% over the past seven trading sessions, according to Dow Jones Market Data.
Bitcoin price took a hit last Wednesday when Silvergate Capital Corp.
AND
said its crypto-enabled Silvergate Bank would cease operations and be liquidated, with the aim of returning all deposits.
However, following the failures of SVB and Signature Bank, bitcoin is up more than 20% over the past nine sessions, trading at $26,750.50 on Friday, according to data from CoinDesk.
Bitcoin has long been viewed with skepticism by the financial establishment, but its proponents have argued that it represents an alternative to traditional banking.
See: What happened to Silvergate Capital? And why is it important?