Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading on February 1, 2023 in New York City.
Michael M. Santiago | Getty Images
Stock futures jumped Sunday night after regulators announced a plan to freeze all depositors in failed Silicon Valley Bank and make additional funding available to other banks.
S&P 500 futures rose 0.7% and Nasdaq 100 futures rose 0.9%. Futures linked to the Dow Jones Industrial Average rose 170 points.
All Silicon Valley Bank depositors will have access to their money starting Monday, according to a joint statement from the Treasury Department, the Federal Reserve and the FDIC.
“We went into the weekend as just a very binary event. Either 100% of the uninsured depositors were going to be stopped or not,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said Sunday during a CNBC special. we have the backstop the markets are going to celebrate. It doesn’t necessarily answer the problem of what happens from here in terms of the economic impact (from) banks having to raise deposit rates across the board.”
“Going forward, I’m more concerned about bank profitability than bank balance sheets,” he added.
The Federal Reserve said it is creating a new Bank Term Funding Program aimed at securing deposits. The facility will offer loans of up to one year to banks, savings associations, credit unions and other institutions.
“This action will strengthen the banking system’s capacity to protect deposits and ensure the continuous supply of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”
Along with the facility, the Fed said it will ease the terms of its discount window, which will use the same conditions as the BTFP.
The major indexes are coming off a losing week after SVB’s collapse sent shockwaves through the stock market. The Dow fell 345 points, or 1.07%, on Friday. The S&P 500 fell 1.45% and the Nasdaq Composite fell 1.76%. All the major averages posted weekly losses, with the Dow ending its worst week since June.
The yield on the 2-year government bond fell sharply last week, posting its biggest 2-day drop since 2008, as the SVB’s shutdown triggered a flight to safer assets such as government bonds.
On Friday, Silicon Valley Bank was taken over by regulators after massive withdrawals a day earlier sparked a bank run. Investors are now monitoring news from Washington and waiting to see how regulators will handle the fallout.
Elsewhere, investors are watching various economic reports this week. Tuesday’s CPI report on Tuesday is the last major inflation figure ahead of the Fed’s next meeting, which ends on March 22. February retail sales and the producer price index are also on deck.
“The coming week is going to be about how fear and economics play out,” said Amit Sinha, head of multi-asset design at Voya Investment Management. “If the market feels that SVB is an isolated event, then the fear and contagion-driven selling may subside. And if that happens, then it’s all back to the Fed and inflation.”