Banking Sector Reeling After SVB Financial Collapse – “Buy the Dip
The banking sector has been hit hard by the recently announced collapse of SVB Financial.[0] The Dow Jones Industrial Average dropped more than 500 points on Wednesday morning, representing a 1.3% decline.[1] The S&P 500 and Nasdaq dropped 1.5% each.[1] On Monday, President Biden sought to reassure Americans that the nation's banking system is safe.[2]
Despite the President's words of comfort, the 10-year U.S. Treasury yield tumbled to 3.49%, while the 2-year Treasury yield fell to 3.97%, the lowest since February 2nd. Bond yields have fallen drastically, with the 10-year Treasury yield down 14 basis points to 3.49%. The CME FedWatch Tool now expects a 83% chance of a 25-basis-point rate hike at the March meeting.[3]
The sell-off hit the Big Four trillion-dollar banks, causing their share prices to dive. Citigroup's share price dived 7.45%, Wells Fargo sank 7.1%, Bank of America plunged 5.8% and JP Morgan fell 1.8%. Meanwhile, smaller, regional banks, including First Republic Bank, PacWest Bancorp, Western Alliance Bancorp, and Signature Bank, saw their stock prices fall by more than 15%.[2]
Goldman Sachs has advised investors to “buy the dip” in bank stocks, including Charles Schwab, whose stock has tumbled 30% since the SVB collapse.[0] Analysts such as Will Nance have suggested that the dip could be an opportunity to invest in banks.
0. “Buy the Dip in Banks? Morgan Stanley Disagrees” TipRanks, 13 Mar. 2023, https://www.tipranks.com/news/article/buy-the-dip-in-banks-morgan-stanley-disagrees
1. “Credit Suisse, Citi and more bank stocks tumble amid Silicon Valley Bank turmoil” ABC News, 15 Mar. 2023, https://abcnews.go.com/Business/bank-stocks-tumble-amid-silicon-valley-bank-turmoil/story?id=97878825
2. “$100BN wiped off US banking market in SINGLE DAY in bloodbath on Wall Street” Daily Mail, 13 Mar. 2023, https://www.dailymail.co.uk/news/article-11855573/100BN-wiped-banking-market-SINGLE-DAY-bloodbath-Wall-Street.html
3. “Stock Market Today: Markets Rise as Bank Stocks Bounce” Kiplinger's Personal Finance, 14 Mar. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-markets-rise-as-bank-stocks-bounce
