Financial Earthquake Reverberates in Pre-Market

Monday, March 13th, 2023

Count this as something not many foresaw ahead of time: something of a run on certain regional banks greets our pre-market trading activity to start a new week. Even as President Biden stepped up to announce the U.S. government was backstopping customer deposits at failing Silicon Valley Bank (SVB). Alongside, Signature Bank SBNY deposits are also being supported; that stock has been halted from trading this morning.

A lack of tech startup development — including IPOs — hurt the prospects for the venture capital musings that made up much of SVB’s business. That, along with managerial issues that are pretty obvious even if they remain unclear at the moment. But the fear of contagion has now hit other regional banks in the Silicon Valley/NoCal area: Pacwest PACW is currently down -64% and Western Alliance WAL is -68%.

The big banks are so far pretty unscathed: JPMorgan JPM are in the red slightly this pre-market, -1%, while Goldman Sachs GS is -2%. This is certainly subject to change as more facts come to light. And, to this point, Biden is avoiding calling this a “bank bailout,” though depending on what comes next, his hands may be tied on this matter. What on Friday morning appeared to be an issue associated primarily with the top brass at SVB now looks to be something with a few real tenterhooks in it.

Is this the “something breaking” that some analysts had warned would happen with the Fed aggressively raising interest rates over the past year? Due to the extraordinary — and rare — series of events in this matter thus far, it’s possible. There’s still a lot of smoke here; until it clears, it’s hard to make big moves in either direction — other than selling positions in small banks affiliated with the greater San Francisco business community.

Major market indices are down this morning, but not in a screaming nosedive: the Dow is -240 points, the S&P 500 is -30 and the Nasdaq is -50 points. What we do know is that the Biden administration is focused on this issue currently (better than ignoring this may be a big problem, we suppose), and that this financial earthquake is real, even if it may not possess a lot of aftershocks. If we start to get an inkling that something more troubling is afoot, we might expect the Fed to once again re-address its monetary policy nine days ahead of its next decision on interest rates.

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