Wall Street traders looking at market charts in the months ahead won’t have any trouble pinpointing the very moment Silicon Valley Bank blew up.
(Bloomberg) — Wall Street traders looking at market charts in the months ahead won’t have any trouble pinpointing the very moment Silicon Valley Bank blew up.
Worries about banking sector stability and new Federal Reserve policy headaches have sparked dramatic moves across everything from two-year bond yields and financial stocks to haven trades like gold.
While major equity indexes are rebounding from last week’s rout, volatility is gripping assets of all stripes with multiple trading halts hitting regional banks in the Monday session.
“When the terminal rate is repriced 100 basis points in a week against a backdrop of what is still a very tight jobs condition, you will get sustained rate volatility and, by extension, elevated volatility across asset classes,” says Michael Purves, founder and CEO of Tallbacken Capital Advisors.
Here are some major market moves rocking Wall Street and beyond:
The turmoil has caused a rapid shift in expectations for the Fed’s next moves. Swaps traders are now pricing a less than one-in-two chance the Fed will hike by another quarter point this cycle, after fully pricing in half-point hike in March less than one week ago.
A big shift in Fed policy expectations has sent the yield on the two-year Treasury note on pace for the steepest three-day decline since Black Monday of October 1987. Two-year yields at one point fell nearly 60 basis points to 3.99%, the lowest since October.
San Francisco-based First Republic Bank plunged as much as 78% and trading in the shares were halted for volatility, as news that it secured additional financing failed to calm investors.
The Cboe Volatility Index, a gauge of options cost tied to the S&P 500 known as the VIX, jumped Monday to briefly top 30 for the first time since last October.
The Bloomberg Dollar Spot Index fell for a third session Monday, erasing its year-to-date advance while other G-10 currencies including the Japanese yen strengthened against the greenback.
Gold surged to a one-month high, extending Friday’s gain as investors flocked to safe havens.
–With assistance from Eddie Spence, Allegra Catelli and Vildana Hajric.
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