The State of the Stock Market Amid the Bank Crisis

U.S. stock futures, which signal the direction markets will take when they open in New York, indicated a 0.8 percent decline on Friday.

Other signs of anxiety persist. New data from the Federal Reserve released on Thursday showed that banks borrowed record amounts of emergency funds from the central bank, tapping both existing facilities and a new program to shore up liquidity that was announced after the government takeovers of a once-obscure lender to the tech world, Silicon Valley Bank, and the small Signature Bank in New York.

And First Republic’s shares are slipping again, with steep premarket losses on Friday — shares fell more than 20 percent — erasing all of the previous day’s gains, suggesting that trading in banking shares will remain volatile on Friday. Other regional banks, like PacWest and Western Alliance, fell by around 10 percent in premarket trading. Credit Suisse’s stock also lost ground in European trading, reversing most of Thursday’s gain.

Analysts at UBS wrote that banking stocks would “truly settle only after the market feels as if there is a longer-term solution” to First Republic’s woes. (The deposits from other banks are uninsured and for an initial term of 120 days.) An index tracking the largest U.S. largest banks has fallen nearly 20 percent this year, with much of the loss concentrated in the past week, versus a gain in the broader market over that period.

Before the broad panic about banks first surfaced last week, the biggest challenge facing economic policymakers was rapid inflation. Central bankers were caught between trying to tame price rises while not causing growth to stall. Those efforts suddenly appeared far more complex with the sudden prospect of successive bank runs.

In China, which is trying stabilize its economy after it stalled last year because of stringent “zero Covid” measures, the central bank on Friday evening acted to get more money in the hands of companies and consumers. It said it would reduce by a quarter-point the share of assets that Chinese commercial banks must keep on reserve. This frees the banks to lend more money, especially to real estate developers.

Keith Bradsher, Joe Rennison, Rob Copeland and Lauren Hirsch contributed reporting.

Article source: https://www.nytimes.com/2023/03/17/business/banks-crisis-first-republic-credit-suisse.html