U.S. stock futures jumped Sunday evening after regulators announced a plan to backstop all the depositors in failed Silicon Valley Bank and make additional funding available for other banks.
S&P 500 futures gained 1.4% and Nasdaq 100 futures rose 1.5%. Futures tied to the Dow Jones Industrial Average were up by 310 points.
All Silicon Valley Bank depositors will have access to their money starting Monday, according to a joint statement from the Treasury Department, Federal Reserve and the FDIC.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the joint statement said.
“We went into the weekend as just a very binary event. Either 100% of the uninsured depositors were going to be backstopped, or not,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said Sunday during a CNBC special. “Now that we have that backstop, the markets are going to celebrate. It doesn’t necessarily answer the problem of what happens from here in terms of the economic impact [from] banks that are going to have to raise deposit rates across the board.”
“Going forward, I’m more worried about bank profitability than bank balance sheets,” he added.
The Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding deposits. The facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Along with the facility, the Fed said it will ease conditions at its discount window, which will use the same conditions as the BTFP.
The major indexes are coming off a losing week after the collapse of SVB sent shockwaves through the stock market. The Dow on Friday dropped 345 points, or 1.07%. The S&P 500 shed 1.45% and the Nasdaq Composite fell 1.76%. All of the major averages posted weekly losses, with the Dow finishing its worst week since June, CNBC reported.
On Friday Silicon Valley Bank was taken over by regulators after massive withdrawals a day earlier created a bank run.
Elsewhere, investors are watching various economic reports this week. Tuesday’s consumer price index report on Tuesday is the last major inflation data release ahead of the Fed’s next meeting, ending March 22. February retail sales and the producer price index are also on deck.
“For the week ahead, it’s going to be about how fear and economics play out,” said Amit Sinha, head of multi-asset design at Voya Investment Management. “If the market feels that SVB is an isolated event, then the fear and contagion driven selling may abate. And if that happens then it’s all back to the Fed and inflation.”
