U.S. stocks opened lower on Friday after Silicon Valley Bank filed for bankruptcy after being taken over by the FDIC last week, while concerns about Credit Suisse, First Republic Bank and the health of the broader banking sector reemerged.
What’s driving markets
The Dow Jones Industrial Average
shed 237 points, or 0.7%, to 32,008.
The S&P 500
fell by 16 points, or 0.4%, to 3,943.
The Nasdaq Composite
declined by 31 points, or 0.2%, to 11,693 .
On Thursday, the Dow Jones Industrial Average rose 372 points, or 1.17%, to 32247, the S&P 500 increased 68 points, or 1.76%, to 3960, and the Nasdaq Composite gained 283 points, or 2.48%, to 11717.
What’s driving markets
Concerns about the banking sector’s ability to withstand ongoing deposit flight reemerged Friday morning as SVB announced it would file for Chapter 11 bankruptcy protection after being taken over by the FDIC last week. The news, along with other signs of ongoing stress in the banking sector, caused stocks to reverse some of their late-Thursday rebound.
The market received a reprieve Thursday afternoon following the announcement that 11 of the largest U.S. banks, including JPMorgan, Citigroup, Bank of America and Wells Fargo, had agreed to plunk $30 billion of uninsured deposits into First Republic Bank
Meanwhile, data released by the Federal Reserve showed a combined $165 billion of borrowing, mostly through its discount window but also the new facility where bonds trading at a discount can be used as collateral, at par value. The data showed U.S. banks’ need for liquidity from the Fed has climbed to a record high, surpassing levels seen during the financial crisis.
See: Banks have borrowed $165 billion from the Fed in past week after SVB failure
The reaction across markets shows investors are still very much worried about the health of the banking sector, said Mark Luschini, chief investment strategist at Janney.
“I think there are still a lot of questions right now,” Luschini said during a phone interview with MarketWatch. “Investors can’t seem to hold their enthusiasm for equities for longer than a 24-hour news cycle.”
Shares of Credit Suisse and First Republic traded lower Thursday, which also showed that investors’ concerns have yet to be ameliorated.
“One can understand” why investors are still so anxious about the banking sector considering all the capital that has flowed into both First Republic and the broader banking sector by way of the Fed, said Matt Maley, chief market strategist at Miller Tabak + Co., in emailed commentary.
“It sure looks like investors are still very concerned about this situation with the banking system,” he added.
Data on U.S. industrial production released by the Federal Reserve Friday morning showed it was flat in February. Later in the morning, the University of Michigan will release its latest reading on consumer sentiment. Beyond that, investors are looking ahead to the Federal Reserve’s next interest-rate decision, which is due Wednesday.
See also: Fed likely to follow ECB’s playbook and hike interest rates next week
Adding further potential for volatility in markets, nearly $3 trillion in equity options are set to expire during Friday’s “triple witching.”
See: U.S. stocks set for wild swings as trillions in option contracts set to expire Friday
Companies in focus
FedEx Corp.’s stock
jumped after beating analyst estimates in its fiscal third-quarter earnings. The shipping firm also lifted its profit forecast for the full fiscal year, increasing its earnings-per-share guidance to $14.40 from $13.80.
First Republic Bank‘s stock
tumbled, erasing Thursday’s gains, after a consortium of big banks including Bank of America Corp. Citigroup Inc., JPMorgan Chase & Co. and others agreed to make uninsured deposits totaling $30 billion to prop up the struggling bank. Among other regional bank, shares of PacWest Bancorp
and of Western Alliance Bancorp
were also down.
Shares of Microsoft Corp.
rallied as analysts bet that the latest iteration of Chat GPT could give the tech giant an even greater edge.