SVB bailout means Fed won’t raise rates in March, Goldman Sachs says

Read: The collapse of the SVB means beware of greater stock market volatility, analysts say.

Here’s Jim Reid and a team of Deutsche Bank strategists summing up a whirlwind few days perfectly: “SVB’s woes are a combination of one of the greatest hiking cycles in history, one of the curves the most reversed in history, from one of the biggest bubbles in the bursting of technology in history and the meteoric growth of private capital The only missing ingredient that is not involved here is a US recession .

It’s just more of the boom-bust cycle we’re stuck in, Reid says. “That being… too much stimulus -> very high inflation and an asset bubble -> aggressive central bank hikes -> inverted curves -> tighter lending standards/crashes -> recession.”

on our call of the day from Goldman Sachs, where economists say bailing out SVB and other depositors will tie the Fed’s hands next week.

“In light of the recent strains in the banking system, we no longer expect the FOMC to proceed with a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March,” a team led by chief economist Jan Hatzius said in a note to clients late Sunday.

Hatzius and Co. expected a 25 basis point hike next week. “We have left unchanged our expectation that the FOMC will make 25 basis point hikes in May, June and July and now expect a terminal rate of 5.25-5.5%, although we see a considerable uncertainty about the trajectory,” they said.

They are clearly not alone, as fed funds futures indicate that the odds of the Fed raising interest rates by 50 basis points next week have fallen from 70% to zero in recent days.

But some say the Wall Street banking juggernaut is getting ahead:

Capital Economics, meanwhile, sides with Goldman here: “Even if the authorities succeed in putting a firewall around the problems of SVB and Signature Bank, the delays with which the policy operates is a reason to adopt a more gradual approach to policy tightening from here,” said Neil Shearing, the group’s chief economist.

Note that Goldman also said that while the Fed has stemmed the panic over SVB and Signature Bank, it remains to be seen whether the FDIC would similarly approach other such lenders if they were smaller than the two banks in question.

The final word and perhaps a testament to the nervousness around banks goes to Mark Haefele, chief investment officer at UBS Global Wealth Management, who told his clients: “We remain the least favorite on financials in our US strategy and recommend investors with above-benchmark weightings in global financials (15% of MSCI ACWI) to review their exposure.

The steps

After soaring Sunday night following measures to curb the SVB panic, Nasdaq-100 futures

NQ00

are higher, S&P 500 futures

ES00

are stable, but futures contracts on Dow

YM00

are in the red. The two-year Treasury yield

TMUBMUSD02Y

is down 31 basis points to 4.284%, the dollar

DXY

is off 0.4% and gold

GC00

is up $28.30 at $1,895.80 an ounce. For more market updates and actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

The FDIC said it transferred all of Silicon Valley Bank’s deposits to a newly created “bridging bank” – Silicon Valley Bank NA – appointing Tim Mayopoulos, former president and CEO of the Federal National Mortgage Association, as CEO. . SVB Financial

SIVB

meanwhile, says it has appointed a restructuring committee to explore strategic alternatives for the holding group and its SVB Capital and SVB Securities businesses. Those actions have since been halted before Friday’s open.

Over the weekend, US regulators promised Silicon Valley Bank

SIVB

depositors will have access to their money, with no fallout for US taxpayers, although stock and bondholders appear to be out of luck. New York-based, crypto-friendly Signature Bank depositors

SBNY

,
closed on Sunday by its state regulator, obtained similar guarantees. The Fed also announced a new emergency lending program for troubled banks to mitigate the risk of contagion. President Joe Biden will discuss the actions taken at 9 a.m. Eastern Time.

But the chaos continues on both sides of the Atlantic. Tainted by similarities with SVB, First Republic Bank

FRC

is down 60%, despite increased funding from the Fed and JPMorgan and assurances from executives. PacWest Bancorp

PACW

is down 37% and Western Alliance

WALL

is at 51%. PNC Financial

ANC

is down just 2% after an upgrade from Citigroup.

Read: Stablecoin Circle issuer to transfer $3.3 billion in cash held at Silicon Valley Bank to BNY Mellon

The UK branch of SVB was bought out for £1 by HSBC

HSBC

HSBA

in an agreement brokered by the country’s Treasury and the Bank of England. US-listed HSBC shares are down 2%, while Credit Suisse shares

CS

CSGN

are down 9%, reaching a new high.

BILL Holdings

BILL

the stock is up 4% as the software company benefits from the SVB measures, after saying it had some exposure to the troubled bank.

Actions of the pharmaceutical group Provention Bio

PRVB

are up 260% in premarket trade after French drugmaker Sanofi

SAN

said it would buy fellow pharmaceutical company in a deal worth $2.9 billion.

The pharmaceutical giant Pfizer

DFP

said he was paying $429 per share in cash for Seagen

NMS

,
a deal worth $43 billion that drives shares of the cancer biotech company up 18%.

Applied materials

ENORMOUS

increased its dividend by 23% and increased its buyback program by $10 billion. The shares are up 1%.

Besides Tuesday’s CPI, the week will also bring other important data, including retail sales, producer prices, housing updates and the Empire State manufacturing survey.

The best of the web

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A driver spent $180,000 to start an Uber Black business. Then the company deactivated his account.

Some of the worst victims of the SVB collapse have been companies developing solutions to the climate crisis.

Armed with human hair and used clothing, the inhabitants of an island in the Philippines try to prevent an oil spill from ruining pristine beaches.

Table

Stock tickers

Here are the most searched tickers on MarketWatch as of 6 a.m.:

Teleprinter	Security Name
TSLA	You’re here
BBBY	Bed bath and beyond
FRC	Bank of the First Republic
SIVB	SVB Financial Group
CMA	AMC Entertainment
EMG	GameStop
TRKA	Troika Media
AAPL	Apple
NVDA	Nvidia
MONKEY	AMC Entertainment Holdings Preferred Stock

Random plays

SVB UK was sold for £1. This will also allow you to buy bandages or elbow grease.

Vasectomies: A Guilt-Free Path to March Madness Viewing.

£250,000 will buy you Britain’s ‘loneliest house’, which requires a 20-minute walk from your car and a complete renovation.

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