By
Temitope Olatunji
April 16th, 2024
With the collapse of SVB, many commentators have been echoing the phrase that no firm is “too big to fail.”
Uncertainty has continued to grip active players in the United States stock market with futures tied to major indices shedding off significant gains on Monday. The futures tied to the Dow Jones Industrial Average (INDEXDJX: .DJI) shed 276 points atop a 0.9% slump.
To complement the bearish trend, the futures tied to the S&P 500 Index (INDEXSP: .INX) also dropped by 1% with that linked to the Nasdaq-100 dropping by 0.7% at the time of writing. The losses being experienced are a reflection of the shockwaves in the US banking sector and the fear of investors in relation to what the aftermath might be.
Silicon Valley Bank (SVB) remains the major concern for many as the foldup of the firm has unsettled the tech ecosystem that it supports. The sigh of relief was introduced following the joint statement from the Treasury Department, the US Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) about the state of SVB and how to move forward.
The regulators said they will not protect SVB equity holders with a bailout but that the bank’s depositors will be able to gain access to their money, starting today.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the joint statement reads.
The trio also said a new funding program will be created to give banks and financial institutions the needed liquidity that will be able to protect investors’ deposits. According to Treasury Sec Janet Yellen, the sort of bailout that was issued prior to the 2008 financial crisis has now stopped as the government does not need to hand out incentives to firms that fail based on bad business calls made.
Cushion the Stock Futures Fall: Banks Giving Guarantee
With the collapse of SVB, many commentators have been echoing the phrase that no firm is “too big to fail”.
In light of this, top banking giants like Charles Schwab Corporation (NYSE: SCHW) have come out to reassure their stakeholders that the firm has robust liquidity to meet its withdrawal obligations. The bank said though it is recording outflows, clients are pushing the funds into other aspects of the bank.
“Client bank sweep cash outflows in February were about $5 billion lower than January and March month-to-date daily average outflows are tracking consistent with February,” the bank said. “Importantly, these outflows reflect a continuation of client decisions to reallocate a portion of their cash into higher-yielding cash alternatives within Schwab.”
Besides Charles Schwab, every business is now granting reassurances to their customers across the board. Most especially, President Joe Biden is also commenting on the safety of funds in the American banking sector thus fueling a targeted attempt is being made to inject positivity that can help upturn the bearish moves in stock futures.