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The sudden shutdown of SVB Financial on Friday following a
failed capital raise triggered concerns about risks to other
banks from the Federal Reserve's sharpest rate hike cycle since
the early 1980s.
Regulators over the weekend stepped in to restore investor
confidence in the banking system, saying Silicon Valley Bank
depositors will have access to their funds on Monday.
Trading in shares of SVB's peer Signature Bank was halted before
the bell. First Republic Bank dropped 61.4% in premarket
trading, while Western Alliance Bancorp fell 26.0%.
Shares of big U.S. banks including JPMorgan Chase & Co, Morgan
Stanley and Bank of America fell between 1% and 5%.
"The situation with SVB reminds people that the era of zero
interest rate money is over," said Russ Mould, investment
director at AJ Bell.
"Generally speaking, higher interest rates have been seen as a
net win because of higher net interest margins. But this is
equally a reminder that they can also be sour loan losses that
come with a higher interest rate environment and a slower
economic environment."
The benchmark S&P 500 tumbled 4.6% last week to mark its biggest
weekly percentage decline since September, erasing nearly all of
its year-to-date gains.
Traders' bets are currently equally split between a pause or a
25-basis-point rate hike at the Fed's next meeting in March..
The projections of a terminal rate have also receded to just
under 5% by July from around 5.5% earlier.
Goldman Sachs analysts said they no longer expect the Fed to
raise rates by 25 basis points at its next policy meeting on
March 21-22.
Investors also await crucial inflation data due on Tuesday for
more clues on the Fed's monetary tightening plans.
At 6:14 a.m. ET, Dow e-minis were down 84 points, or 0.26%, S&P
500 e-minis were down 2 points, or 0.05%, and Nasdaq 100 e-minis
were up 46.5 points, or 0.39%.
(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru;
Editing by Dhanya Ann Thoppil, Sriraj Kalluvila and Vinay
Dwivedi)
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