And so we draw to the end of another hectic week in the markets.
The CBOE VIX index
gauge of equity volatility, rose twice up to 30 before falling back.
The ICE BoAML MOVE index, a financial market VIX, jumped to its highest since the Great Financial Crisis of 2008, at one point up more than 80% from early February.
Those moves illustrate the whipsaw action in stocks and bond yields as traders tried to gauge the severity of the unfolding banking crisis and how much it would compromise the ability of central banks to maintain their anti-inflation strategies.
Concerns that turmoil in the financial sector would have a bad impact on the global economy – and some over-long positioning – also caused oil prices to fall.
Still, the stock market rallied on Thursday and Friday’s tone is, at least on the surface, calm as investors appear to have been bailed out by authorities arranging support for Credit Suisse
and First Republic
But hold on.
The Federal Reserve needs to expand its balance sheet again after it reported late Thursday that banks this week used their new Bank Term Funding Program to lend $11.9 billion. In addition, $153 billion was borrowed via the Fed’s discount window and $142.8 billion in bridging loans.
The market does not know who or how desperate these borrowers may be.
And others worry that the latest moves to help the banking sector are not just covering the cracks, but may be making things worse.
Hedge fund manager Bill Ackman is not happy that the systemically important banks (SIBs) have been convinced to recycle the deposits they received from First Republic Bank (FRB) back into the struggling lender.
“The result is that the FRB default risk is now spread to our largest banks. Spreading the risk of financial contagion to achieve a false sense of confidence in the FRB is bad policy. The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be stopped if it failed.” Ackman wrote in a tweet late Thursday.
“The press release announcing $30B in deposits raised more questions than it answers. A lack of transparency makes market participants assume the worst. I’ve said before that hours matter. We’ve let days go by. Half measures don’t work when is a crisis of confidence.,” he added.
Ackman, who runs Pershing Square Capital Management and is not averse to an apocalyptic outbreak, said the banking sector needed a temporary deposit guarantee immediately until an expanded public insurance scheme is widely available.
“We have to stop this now. We are past the point where the private sector can solve the problem and are in the hands of our government and regulators. Tick tock.”
S&P 500 futures
rose 0.1% as 10-year Treasury yields
fell 4.2 basis points to 3.542%. The dollar index
lost 0.3%, helping lift gold
up 0.7% to $1,936 per ounces.
Try your hand at Barron’s crossword and sudoku games, now running daily along with a weekly digital puzzle based on the week’s cover story. To see all puzzles, click here.
US economic data available today includes industrial production and capacity utilization in February, released at 9.15, followed by February’s leading economic indicator index and consumer sentiment report for March at 10:00 a.m. All times eastern.
It’s another quadruple Witching Friday, with $2.8 trillion worth of options contracts expiring.
Anyone who buys First Republic shares
at the open Thursday and selling at the close could have made about 60% for the day. The recovery came after a consortium of major banks pledged $30 billion in deposits to the lender. However, shares are down 5% heading into the opening bell on Friday after First Republic said it would have to suspend its dividend to save money.
is up 11% in premarket action after the packager delivered results that showed cost savings and the ability to raise prices helped the bottom line.
Shares in Sarepta Therapeutics
falling 20% after the FDA said it would hold an advisory panel on the company’s Duchenne muscular dystrophy treatment.
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Here is CNN’s Fear & Greed index. It is a compilation of seven indicators: market momentum, stock price strength, stock price breadth, put and call options, junk bond demand, market volatility and safe harbor demand.
Eagle-eyed readers may note that this week it dropped to ‘Extreme Fear’ – below the 25 line – before popping back up to just ‘Fear’. The last time the chart dipped this low, in October 2022, it marked a recent low for the S&P 500.
Here were the most active stock exchange tickers on MarketWatch from 6 a.m. Eastern.
|First Republic Bank|
|Bed Bath & Beyond|
|Cyber Security Hub|
|Credit Suisse ADR|
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