Despite Bank Fears And A Fed Hike, Stocks Climbed For The Week
Published Friday, March 24, 2023 at: 7:44 PM EDT
Despite the threat of bank runs and a quarter-point interest rate hike by the Federal Reserve, the Standard & Poor’s 500 stock index closed a volatile week with a gain of 1.4%.
The Federal Reserve raised the target range of its benchmark lending rate by 0.25% on Wednesday, despite the sudden onset of bank runs that erupted two weeks ago, when a run by depositors at Silicon Valley Bank spread fears that a banking crisis could destabilize other banks and spread to other banks, destabilizing the U.S. and global economy.
Although fears about deposits at Deutsche Bank, one of Europe’s biggest lenders, sent its stock nosediving by as much as -15% on Friday, its share price loss diminished to -8.5% by the end of the day.
Wall Street’s reaction indicated the threat to banks would be contained, largely thanks to quick action by the Federal Reserve to create a special funding program, according to economist Fritz Meyer. “The Federal Reserve will be offering loans up to one year in length, and the assets against which they're making these loans will be valued at par,” according to Mr. Meyer, an independent economist. “So the Fed has provided the liquidity that any bank, might need if they get a run on their deposits.“
Some banks suddenly faced a liquidity crisis when depositors earlier this month noticed they were short on cash to pay off depositors. Social media posts accelerated their troubles and made depositors withdraw money from accounts in excess of the $250,000 limit on accounts backed by the Federal Deposit Insurance Corporation (FDIC).
A number of banks, such a Silicon Valley Bank, Signature Bank and Silvergate Bank had tied up too much of their depositor assets in long-term bonds and the aggressive rate-raising campaign, which had sent the Federal Reserve’s benchmark lending rate 600% higher in the previous 12 months, decreased the value of their long-term bond holdings. Selling them to satisfy depositor withdrawals would create a bigger financial hole. The Fed’s swift action on March 12 to create the Bank Term Funding Program prevented banks with a mismatch in their long-term holdings versus short-term liquidity needs from falling victim to the same problem.
The S&P 500 stock index closed Friday at 3970.99, up +0.56% from Thursday, and up +1.39% from a week ago. The index is up +77.48 from the March 23, 2020 bear market low and down -17.21 than its January 3, 2022. all-time high.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
- Strong Jobs Report Caps A Week For The Record Books
- Why Stocks Rose Friday Despite A Rise In Inflation In April
- Weekly Investor Update
- The Confluence Of Bad News For Recent Retirees And Those About To Retire
- Good And Bad News This Week For Investors
- Getting There: The Economic Balancing Act Progressed In March
- Stocks Gained Friday But Closed Fractionally Lower For The Week
- Good News On Inflation But A Recession May Be Hard To Avoid
- Analysis: The First Data Since The Banking Crisis Erupted In March
- Stocks Gained 7% First Quarter And Other Good Financial News
- Despite Bank Fears And A Fed Hike, Stocks Climbed For The Week
- Bank Panic And Strong 1Q '23 Economic Growth
- Mixed Economic Signals And A Bank Failure
- Service Sector Remained Strong In February, Soothing Investors For Now
- Inflation Rose In January, Indicating Tight Monetary Policy May Continue Into 2024
- Amid Divergent Data, Here's What To Know
- Optimistic Again, Will A Fed Algorithm Be Right Again?
- The Bipolar Economy Of 2023
- On Wednesday, We’ll Know If The Federal Reserve Will End Inflation By Causing A Recession
- Technology Drove S&P 500 1.9% Higher Friday, But Look At Tech's Terrible 2022 Loss
- Here What To Know To Invest Wisely
- Prudence Requires Positioning Portfolios For An Economic Expansion