Traders work on the New York Stock Exchange (NYSE) during morning trading on February 01, 2023 in New York City.
Michael M. Santiago | Getty Images
Stock futures rose on Monday morning after regulators announced plans to freeze all depositors at the failed Silicon Valley bank and provide additional funding for other banks.
S&P 500 futures rose 1.8%, Nasdaq 100 futures rose 1.9%. Dow Jones Industrial Average futures rose 406 points.
All Silicon Valley depositors will have access to their money starting Monday, according to a joint statement from the Treasury Department, the Federal Reserve and the FDIC.
“Today, we are taking decisive action to protect the US economy while strengthening public confidence in the banking system,” the joint statement said.
“We went into the weekend as a very binary affair. “Either 100% of uninsured depositors are going to get a refund, or they’re not,” Peter Booker, chief investment officer at Bleakley Financial Group, said during a CNBC special on Sunday. “Now that we have such a backstop, the markets are celebrating. It doesn’t answer the question of what happens from here in terms of economic impact. [from] banks will be forced to raise deposit rates.”
“Going forward, I’m more concerned about the bank’s profitability than the bank’s balance sheet,” he added.
The Federal Reserve also said it would establish a new term bank funding program aimed at protecting deposits. This facility provides loans to banks, savings associations, credit unions and other institutions for up to one year. Along with the facility, the Fed said it will ease conditions in the discount window, which uses conditions similar to the BTFP.
Major indexes lose a week after SVB collapse sent shock waves through stock markets. The Dow fell 345 points, or 1.07%, on Friday. The S&P 500 fell 1.45%, the Nasdaq Composite fell 1.76%. All major averages posted weekly losses, with the Dow ending its worst week since June.
On Friday, the Silicon Valley bank was taken over by regulators after the bank went into receivership after a massive cash withdrawal a day earlier.
Elsewhere, investors will see mixed economic reports this week. Tuesday’s consumer price index report is the last key inflation data before the Fed’s next meeting, which ends on March 22. Retail sales and producer price index for February are also on deck.
“The week ahead will be about fear and how the economy will play out,” said Amit Sinha, head of multi-asset design at Voya Investment Management. “If the market believes that SVB is an isolated incident, then the fear and contagion selling may subside. And if that happens, it all comes back to the Fed and inflation.”