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Wall Street's major indexes mixed, volatile: SPX down 0.3%
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Banks under massive selling pressure after three failures
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Euro STOXX 600 index down >2%
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Dollar lower; crude down ~3%; gold up ~2%; BTC= up >15%
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U.S. 10-Year Treasury yield collapses to ~3.51%
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BANKS LEAD DECLINES AS INVESTORS FLEE AFTER THREE FAILURES (1010 EDT/1410 GMT) Wall Street's major averages were gyrating around flat early on Monday after a third U.S. bank failed over the weekend and investors sold off bank stocks as they worried whether more weakness would be uncovered in the financial system.
State regulators closed New York-based Signature Bank on Sunday, two days after California authorities shuttered Silicon Valley Bank, owned by SVB Financial and Silvergate Capital's announcement on Wednesday that it would have to wind downits operations. With concern spreading after the closures, U.S. President Biden tried to reassure the public saying the administration's actions to help depositors in SVB and Signature should give Americans confidence that the banking system is safe. "Things are moving at warp speed. The market seems to think there is going to be more stress. The question is at what point do they become self-fulfilling? When you start seeing lines outside of banks," said Christopher Mcgratty, head of U.S. bank research at Keefe, Bruyette & Woods in New York
"I've seen this narrative play out in 2008 and markets can be unwound fairly quickly."
While the S&P 500 was down 0.3% the benchmark's bank index tumbled 7.3% with the biggest decliner First Republic Bank , which was down 74.3% after already losing 33% of its value last week. The best performer in the index was JPMorgan which was down 0.9%.
Regional banks were bing hit hardest with the KBW regional bank index down 11.2%. If there was any consolation to be had it was that traders were pulling back expectations for Federal Reserve rate hikes. Here is a snapshot of indexes at 1006 AM EST:
(Sinéad Carew, Medha Singh)
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BANK BLOODBATH: WILL THIS BE THE VOLATILITY EVENT? (0845
EDT/1245 GMT)
U.S. equity index futures are in negative territory on
Monday in volatile trade.
At one, point, e-mini S&P 500 futures were up about
2%. However, that rise has evaporated, and the futures are now
off around 1%. Bank shares remain under pressure. The SPDR S&P
Bank ETF is quoted down around 6%.
With this, the U.S. 10-Year Treasury yield is
collapsing, and the CBOE market volatility index is
jumping back to the 30.00 area, hitting its highest level since
October 24.
Since peaking early on in the bear market at 38.94 in late
January of last year, the market's "fear gauge" has consistently
made lower highs:
Many market watchers have been looking for a volatility
event leading to capitulation to call a market bottom, and
perhaps rightly so. With this, they are expecting a wild spike
higher in the VIX, to extreme levels, to signal the end of the
decline.
Of note, however, the pattern which is already in place of
lower VIX highs against lower SPX lows can also potentially fit
with a bottoming process.
Looking back from 1996 to 2020, on an intraday basis, there
were 12 major S&P 500 declines: six corrections (-10% to -20%)
and six bear markets (-20%+). In only four of those instances
(33% of the time), did the day of the VIX intraday high coincide
with the day of the S&P 500 intraday low. In other words, in a
sign of complete capitulation, the VIX topped the same day the
SPX hit its low.
In eight instances (67% of the time), the VIX intraday high
occurred ahead of the S&P 500's intraday low. In fact, on
average, on the day of the SPX's ultimate low, the VIX high that
day was around 86% of its highest print seen for the decline.
Additionally, in terms of time, on average, the high in the
VIX occurred around 77% of the way through the decline.
Therefore, one could argue that more often than not, the SPX
bottomed past the point of "maximum fear," when the market was
gripped with a sense of "despair."
Admittedly, the current decline from a record high has only
produced a maximum VIX intraday high of 38.94, which is well
below the average maximum high of about 51 in prior declines.
Thus, there still might be a crescendo of panic ahead.
(Terence Gabriel)
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FOR MONDAY'S LIVE MARKETS POSTS PRIOR TO 0845 EDT/1245 GMT - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
