Turmoil continued to engulf shares in banks as investors rushed to reduce exposure to the banking industry after seeing equity stakes wiped out at Silicon Valley Bank and Signature Bank.
The collapse of SVB Financial Group’s Silicon Valley Bank on Friday and Signature’s seizure by regulators over the weekend sent tremors through the broader banking system. Regional lenders plunged to start the week, with the KBW Regional Banking Index sinking by as much as 12%, its sharpest intraday plunge since March 2020.
“The market is likely to remain very cautious despite regulators stepping in,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “This is a difficult position Fed is in, on the one hand it needs to keep hiking to arrest inflation, but also it needs to protect the financial system. Feels like a lose-lose situation for the Fed and the market.”
Many large US banks also churning lower, with JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. all trading down to start the week.
Equity investors so far found little reason to stick around to find out if the customer exodus putting some regional banks under existential pressure would ease. Treasury two-year yields sank as demand for haven assets soared.