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 stop 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 tied 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 that backstop, the markets will celebrate. That doesn’t necessarily answer the problem of what happens from here in terms of the economic impact (from) banks that are going to have to raise deposit rates across the board.”
“Going forward, I am more concerned about banks’ profitability than banks’ balance sheets,” he added.
The Federal Reserve said it is creating a new Bank Term Funding Program aimed at protecting 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 ability to protect deposits and ensure the ongoing 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 terms at its discount window, which will use the same terms as the BTFP.
The major indices come from a lose week after SVB’s collapse sent shock waves through the stock market. The Dow on Friday fell 345 points, or 1.07%. 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 when 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 looking at various economic reports this week. Tuesday’s consumer price index report is the last major inflation statistic to be released ahead of the Fed’s next meeting, which ends on March 22. February retail sales and the producer price index are also on deck.
“In the week ahead, it will 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 the SVB is an isolated event, then the fear-mongering and spread-driven selling may subside. And if that happens, it’s all back to the Fed and inflation.”