Investor sentiment on U.S. equities improved after U.S. bank regulators said they’d make depositors whole at Silicon Valley Bank and Signature Bank, both taken over by the FDIC, and would provide a lending facility to backstop eligible U.S. lenders.
At 8:30 PM ET, S&P futures rose 1.5%, Nasdaq futures rose 1.5% and Dow futures gained 1.1%. On Friday, the S&P 500 had slid 1.5%, the Nasdaq Composite Index had dropped 1.8%, and Dow Jones Industrial average, had declined 1.1%. after the Federal Deposit Insurance Corp. had taken over Silicon Valley Bank in the second-biggest ever bank failure.
“Guaranteeing all depositors under the systemic risk exemption will be highly controversial but should quell threatened follow-on runs on regional banks, while also preventing the failure of tech start-ups that kept their funding on deposit at SVB,” said Evercore ISI’s Krishan Guha and Peter Williams in a note to clients.
22V Research’s Dennis DeBusschere commented: “The Fed/Treasury announcement reduces NEAR TERM tail risk. The knee jerk market reaction seems right.”
In Asia, Japan’s Nikkei 300 Index fell 1.8% in early trading. Hong Kong’s Hang Seng Index and the Shanghai 180 Index haven’t yet started trading.
U.S. Dollar Index has slipped 0.5%.
To provide support for U.S. financial institutions’ liquidity, the Federal Reserve is creating a new Bank Term Funding Program, offering loans of up to one year in length.