By Yasin Ebrahim
Investing.com – The S&P 500 pared losses Monday, as investors weighed up a sharp drop in rates amid bets of a less aggressive Federal Reserve and ongoing turmoil in the banking sector despite the rescue of SVB.
Treasury yields plummeted, with the 2-year Treasury falling more than 51 basis points to six-week lows as investors bet that the turmoil in the banking sector may force the Fed to rethink its rate hike path.
“Fed funds futures are reducing pricing for the size of a potential hike at that meeting to be closer to 25bps,” Scotia Economics said in a note. Before the turmoil in the banking sector began to unfold over the back half of last week the market had been pricing most of a 50bps move, Scotia Economics added.
Following the collapse of Silicon Valley Bank and Signature Bank (NASDAQ: SBNY ), the U.S. government and Federal Reserve stepped to rescue the beleaguered banks, agreeing to backstop all depositors.
The Fed also launched a new funding program offering loans with maturities of up to year.
The support from the Fed failed to stem the turmoil in banks, however, with First Republic Bank (NYSE: FRC ) falling more than 50%, while shares of major banks including JPM, BAC, and Citigroup (NYSE: C ) also down sharply.
Tech stocks, however, helped the broader market recovery underpinned by the fall in Treasury yields.
In other news, Roku (NASDAQ: ROKU ) cut losses to trade above flatline after the company said Friday it revealed it had about $487 million, or 26%, of its cash reserves stuck at Silicon Valley Bank.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.