Yesterday’s trading session on Wall Street was nothing short of a bloodbath for US banks, with over $100 billion in value wiped off due to the collapse of Silicon Valley Bank. The sheer velocity of money was so intense that trading had to be halted intermittently on at least 20 regional banks, as regulators rushed to intervene.
But that’s not all – the Big Four of US banks were also caught in the crossfire of this financial disaster. Citigroup’s share price took a dive of 7.45 percent, while Wells Fargo sank by 7.1 percent. Bank of America wasn’t far behind, plunging by 5.8 percent, and even JP Morgan felt the heat with a 1.8 percent fall.
Regional banks took the biggest hit, with First Republic leading the pack with a staggering 62 percent drop. Western Alliance was also badly affected, closing with a loss of 47 percent, and KeyCorp dropped by 21 percent.
Lessons learned: how can the banking industry prevent similar collapses in the future?
The financial world was rocked by this unprecedented event, leaving many investors and traders reeling. The question on everyone’s lips now is: what’s next for the banking industry, and how will it weather this storm? More than $100 billion was wiped off US banks’ value today in a bloodbath sparked by the collapse of Silicon Valley Bank – the second-largest collapse ever by a US bank. And things only got worse from there.
Even an intervention by POTUS, who reassured the public that ‘Americans can have confidence that the banking system is safe’, couldn’t stop the market from plummeting. And former White House adviser Steve Moore is warning that SVB’s collapse may just be the tip of the iceberg, exposing a broader weakness brought about by Biden’s $4 trillion COVID stimulus package.
But how did this potential banking crisis happen? According to Moore, it’s not because there aren’t enough bank regulators, as POTUS is trying to say. It’s because of the massive inflation and trillions of dollars of borrowing that the federal government has done – putting our financial system in great jeopardy and peril.
As investors frantically started withdrawing funds amid fears that SVB could no longer keep pace with the Fed’s rate hikes, at least 20 regional banks were forced to halt trading. The Big Four of US banks – Citigroup, Wells Fargo, Bank of America, and JP Morgan – were also drawn into the bloodletting. Citigroup’s share price dived a whopping 7.45 percent, Wells Fargo sank 7.1 percent, Bank of America plunged 5.8 percent, and JP Morgan fell 1.8 percent.
The worst affected regional banks included First Republic, which fell by a staggering 62 percent, Western Alliance which closed with a loss of 47 percent, and KeyCorp which dropped by 21 percent. It’s enough to make your head spin.
Friday, the second-largest collapse of a US bank sent shockwaves through Wall Street, wiping out more than $100 billion in value for the nation’s banks. The collapse of Silicon Valley Bank (SVB) triggered intermittent halts on at least 20 regional banks as regulators struggled to keep up with the velocity of money. Even the Big Four of US banks were not spared, with Citigroup’s share price diving 7.45 percent, Wells Fargo sinking 7.1 percent, Bank of America plunging 5.8 percent, and JP Morgan falling 1.8 percent.
Regulators did their best to restore investor confidence in the banking system over the weekend, but the Fed’s decision next week will likely hinge on the inflation data due this week. If the Consumer Price Index and Producer Price Index are shockingly bad, the Fed could find itself in a much tougher spot. Preliminary data shows that the S&P 500 lost 5.82 points, or 0.16%, to end at 3,855.54 points, while the Nasdaq Composite gained 49.74 points, or 0.45%, to 11,188.63. The Dow Jones Industrial Average fell 86.66 points, or 0.27%, to 31,822.08. The benchmark S&P 500 is now up about 1% for the year so far, but it briefly erased all year-to-date gains earlier in the session.
Navigating a volatile market post SVB collapse
Will the Fed become less hawkish, or will interest rates continue to rise, causing even more financial problems for big banks? The drama on Wall Street continues to unfold, and we’re all on the edge of our seats waiting to see what happens next.
Interest rates have been on the rise, with the Fed hiking them multiple times throughout 2022 to cool off an overheating economy. This has led to financial problems for the banks, as we’ve seen with SVB and its peers. But now, some speculate that the Fed could ease up on its hawkish stance, especially if we see some shockingly bad inflation data this week.
The markets were thrown into chaos, with the S&P 500 losing 5.82 points, or 0.16%, while the Nasdaq Composite gained 49.74 points, or 0.45%. But some sectors, such as utilities and real estate, managed to weather the storm. Meanwhile, Charles Schwab took a hit after reporting a decline in client assets and margin balances.
It’s not all doom and gloom, though. Pfizer has announced its plans to buy Seagen for a whopping $43 billion, sending its stock soaring. And as regulators step in to restore investor confidence, we’ll have to wait and see how the rest of the week plays out. Buckle up, folks – it’s going to be a wild ride.
