The collapse of the US start-up financier SVB caused unrest in the banking sector on Friday. The prices of the big money houses on Wall Street collapsed massively at times, as investors feared latent risks in the balance sheets. The Dow Jones index of standard values lost 1.2 percent to 31,853 points by midday. The broader S&P 500 fell 1.6 percent to 3,855 points. The Nasdaq index fell 1.9 percent to 11,122 points.
The Silicon Valley Bank (SVB) was closed by a California regulator on Friday as a result of massive price losses. According to insiders, an emergency capital increase that had become necessary after billions in losses from the sale of a bond portfolio had previously failed. It is the largest US bank failure since the financial crisis.
Trading in the papers of the institute, which promotes tech companies and start-ups, was suspended from trading on Friday. On Thursday they had lost around 60 percent, pre-market losses of a similar amount had been announced.
Fears of widespread problems in the financial sector dragged down shares in the major US institutions. “Many banks hold large portfolios of bonds and rising interest rates make them less valuable. The SVB situation is a reminder that many institutions are sitting on large unrealized losses on their fixed income holdings,” said Russ Mold, investment manager at AJ Bell.
Goldman Sachs stocks fell 3 percent and Morgan Stanley lost 2 percent. JPMorgan shares, on the other hand, gained two percent after the regulators intervened, and Bank of America also made up for their losses. Some analysts had described the price decline in the sector as exaggerated. SVB’s problems are “too specific to generalize to everyone,” said Ebrahim Poonawala, an analyst at Bofa Securities in New York.
Weakened wage growth at least eased inflation worries and investors’ fears of further large interest rate hikes by the US Federal Reserve on Friday. In February, US nonfarm payrolls added 311,000 jobs, down from a revised 504,000 in January. US wages rose at their lowest monthly rate in 12 months. Traders were pricing in a less than 40 percent chance of a 50 basis point rate hike by the Fed this month, compared to a 50 percent chance earlier. That hurt the dollar. In return, the euro rose 0.8 percent to $ 1.0660. The yield on ten-year US bonds fell to 3.745 percent.
On the stock market, investors cashed in at the US shoe manufacturer Allbirds after a disappointing outlook for the first quarter. Shares fell as much as 34 percent to a record low of $1.55. According to Allbirds, revenue will be in the range of $45 million to $50 million. Analysts polled by Refinitiv had assumed an average of $51.83 million.
An unexpectedly large quarterly loss sent Gap stocks plummeting. The shares of the US fashion chain fell by around seven percent. The company reported a loss of 75 cents per share for the fourth quarter. Analysts had only expected a minus of 46 cents.