Fed's economic reality collided with the market's view and major averages turned lower after Fed Chairman Powell ruled out lowering rates in 2023 and Treasury Secretary Yellen said that the FDIC is not looking to provide insurance to all bank deposits.
With all eyes on Fed's rate decision and accompanying commentary, the Federal Reserve's credibility is on line after fueling inflation through a decade of negative rates.
Benchmark indexes rebounded, regional banks recovered and crude oil price dropped to a new 15-month low. Regional banks urge lawmakers to extend guarantees to all uninsured deposits and prevent the outflows to larger banks.
The Swiss regulators and the central bank forced the purchase of Credit Suisse by UBS after months of assets and deposit outflows, removing one uncertainty from the global marketplace.
Market averages drifted lower on the final day of the week but the Nasdaq and the S&P 500 indexes advanced in a volatile week. Investors are asking more questions about the health of the U.S. banking system after rapid rise in rates dent assets at most banks.
The $30 billion deposit from 11 largest banks in the U.S. may shore up confidence in First Republic for a while, but regulators will struggle to arrange similar temporary fixes as losses mount in the assets held by regional and large banks.
Banks resumed selloff amid growing worries of the rising interest rate risks evolving to deposit risks forcing banks to raise more capital and seek merger partners. Crude oil dropped to a new 15-month low.
New worries of the health of the banking system added to market jitters as investors grappled to separate undercapitalized banks that may suffer from high interest rate risks.
Market indexes in the U.S. and Europe dropped sharply on the growing realization that rising interest rate risks could lead to deposit risks and may create conditions for a bank run at undercapitalized banks.
Swift and strong actions by bank regulators and government officials calmed market nerves. However, banks of all sizes face larger interest rate risks and worries of deposit outflows as the economy slows down and higher rates stay longer.
Market indexes advanced after overall inflation eased in February. Regional banks rebounded and trimmed losses of the previous three sessions. Moody's lowered its view on the entire U.S. banking system and placed six banks on its watch list.
