Pressure From Bank Shares Weighs On S&P 500 On Monday

There was no change in the S&P 500 on Monday as traders remained skittish about the market despite the plan to backstop all the depositors of Silicon Valley Bank, which failed in July and to provide additional funding to other banks.

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There was a 0.2% decline in the broad index and a 0.2% rise in the Nasdaq Composite. The Dow Jones Industrial Average gained 87 points, or 0.3%, while the broad index lost 0.2%.

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There was a spike in the Chicago Board Options Exchange's volatility index that was not seen since late 2022 and neared territory considered highly risky.

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The price of bank stocks was under pressure on Monday, with JPMorgan Chase and Citigroup both falling. There were even more drops in regional banks, with First Republic leading the way with a 65% decrease.

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“It is apparent that the financial markets are caught between fears of regional bank runs and central banks worried about sticky inflation, which are really two sides of the same coin”, said Barclays analyst Ajay Rajadhyaksha.

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While other areas of the market, such as some technology stocks like Apple and defensive names like Johnson & Johnson and Eli Lilly, were able to advance, other areas of the market, such as the pharmaceutical sector, struggled.

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According to a joint statement from the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation, all Silicon Valley Bank depositors will be able to access their money starting Monday, according to a joint statement.

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Furthermore, as part of its efforts to safeguard deposits, the Federal Reserve has announced the creation of a new Bank Term Funding Program. The facility will be able to provide loans of up to one year to banks, saving associations, credit unions, and other institutions that qualify.

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Earlier this week, President Joe Biden said that Americans can trust the U.S. banking system shortly before the market opened on Monday morning.

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“Your deposits will be there when you need them,” he assured.

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There are a number of economic reports due out this week, which investors are closely watching. The consumer price index report that was released on Tuesday is the last major release of inflation data before the Fed's next meeting, which is scheduled to take place on March 22. There will also be a release of the producer price index for February as well as the February retail sales.