Marketbites: 2nd Biggest Bank Failure in U.S. History
Portfolio Manager Commentary:
Stocks fell Friday as tech-focused lender Silicon Valley Bank shut down following losses in its bond portfolio, prompting the biggest bank failure since the global financial crisis and sending shockwaves through the banking sector. All the major averages capped off the week with losses. The Dow fell 4.44% to post its worst weekly performance since June. The S&P dropped 4.55%, while the Nasdaq lost 4.71%.
Regulators took control of Silicon Valley Bank on Friday, after shares tumbled Thursday and the bank struggled on Friday to find another company to buy it. Regional bank stocks tumbled in the wake of Silicon Valley Bank’s demise, with the SPDR S&P Regional Banking ETF lost nearly 4.4%. Several bank stocks were repeatedly halted on Friday, including First Republic, PacWest and crypto-focused Signature Bank. First Republic dropped 14.8%, and PacWest shed 37.9%. Some bellwether bank stocks suffered smaller losses even as SVB’s fallout wreaked havoc on regional names. Goldman Sachs and Bank of America fell 4.2% and 0.9% respectively.
The turmoil among bank stocks overshadowed a February jobs report, which gave some hints that inflation could be slowing. Payrolls increased more than expected, but investors focused on the smaller-than-expected gain in wages, which may cause the Federal Reserve to rethink its aggressive stance on rate hikes.
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Regulators shut down Silicon Valley Bank after a bank run doomed the tech lender’s plans to raise capital. It is by far the biggest bank to fail since the near collapse of the financial system in 2008, and investors are worried about banks with a similar profile. The collapse occurred in just 48 hours after the bank surprised investors Wednesday evening with news of a $2.25 billion raise to fix up its balance sheet.