U.S. stocks closed lower on Friday amid concerns about the stability of the banking sector following a bankruptcy filing by SVB Financial Group and news that banks had borrowed $165 billion from the Federal Reserve in the past week. The Dow fell 0.1%, while the S&P 500 gained 1.4% and the Nasdaq climbed 4.4%, marking its largest weekly percentage gain since January.
Investors are closely monitoring economic data to gauge the pace of the economy’s slowdown, with concerns mounting over whether banking problems will lead to an “accelerated slowing.” The Conference Board reported that the U.S. leading economic index fell 0.3% in February, marking the 11th straight monthly decline. Meanwhile, U.S. industrial production remained flat in February, according to data released by the Fed on Friday.
Consumer sentiment also fell in March, with the University of Michigan’s preliminary index reading at 63.4, down from 67 the prior month, reflecting a more pessimistic outlook among consumers than in the last four months. Investors have been buying up cash at the highest weekly rate since April 2020, with cash funds receiving an inflow of $112.7 billion in the latest week, according to BofA Global Research.
Struggling Swiss banking giant Credit Suisse has agreed to be bought by rival UBS at a discount to Friday’s closing price after a wave of customer deposits exited the bank. The Swiss National Bank has authorized both banks to borrow up to 100 billion francs in a liquidity assistance loan, with Credit Suisse receiving a loan backed by a federal default guarantee.
With concerns mounting over the banking crisis, markets are in a vulnerable position ahead of the Federal Reserve’s meeting this week, with traders betting that it could lead to significant interest-rate cuts in the next year. The market is expecting the Fed to announce a quarter-percentage-point rate hike, with futures indicating a 62% chance of that happening and a 38% chance of a pause.
Asian stocks fell after opening higher on Monday amid contagion fears surrounding financial shares. Nifty fell 1.8% on a weekly basis, falling for the second consecutive week, as investor wariness about a potential banking crisis continues to restrict a fast upmove. The unexpected outcome of the US Fed meeting could bring some turbulence to the markets.