Retail markets cool down after havoc caused by SVB’s collapse
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
There was increased volatility in the retail market on Monday because of the effects triggered by the closure of Silicon Valley Bank last week. On Monday, retail trading volumes for securitized derivatives nearly doubled against the daily average despite uncertainty across financial markets.
Retail traders cool down after havoc caused by SVB’s collapse
According to a report by Spectrum Markets, the collapse of SVB on Friday saw retail traders remain calm, and most did not react strongly to the news. The report further noted that the retail trading volumes also increased to the highest level in the last six months, but this did not affect the overall market sentiment.
The report explained a significant increase in the average SERIX sentiment last week for NASDAQ and the S&P 500. The two indexes, which largely determine the market trend, also entered the bullish zone last week, which was a positive move for the market.
“Last week’s average SERIX sentiment for both the NASDAQ 100 and the S&P 500 increased compared to the previous week, shifting from 100 to 101 and from 97 to 108, respectively, with both indexes crossing the 100 threshold to enter the bullish area,” the report said.
The SERIX sentiment was significantly stable on Monday despite a drop in the NASDAQ 100 and the S&P 500 indexes. Spectrum Markets explained that retail traders were still not convinced that there was a crisis in the financial markets. Additionally, these traders were not concerned about the reoccurrence of another Lehman situation.
US bank stocks plunge before rebound
On Sunday, tensions grew about the situation of the US banking sector, and bank stocks witnessed increased volatility. These stocks dropped to significant lows on Monday before a significant recovery on Tuesday as the Federal Reserve and the US government announced intervention plans.
The situation on Monday indicated that traders and investors were selling off their holdings because of a lack of confidence in the banking sector’s health. The largest drop on Monday was seen by First Republic Bank, which tumbled by more than 60%. The stock for this bank recovered on Tuesday before another massive drop on Thursday.
The other bank that also witnessed a massive drop is Western Alliance Bancorp. The shares of this bank plunged by 64% on Monday amid increased selling pressure. However, the bank’s stock recovered the following day amid a recovery across the broader market, as the fear of contagion from the collapse of SVB and Signature Bank eased.
The collapse of Silicon Valley Bank has been ranked as one of the worst bank failures in the United States since the 2008 crisis triggered by the Lehman situation. Before SVB’s collapse, Silvergate Bank announced that it was voluntarily wounding up operations as its liquidity was affected by the collapse of the FTX cryptocurrency exchange.
Less than two days after the collapse of SVB, Signature Bank also announced that it was shutting down operations. The closure of Signature Bank marked the third-largest banking failure in the US.
