US regulators have implemented a plan to protect depositors of Silicon Valley Bank and Signature Bank in New York, which were on the brink of collapse due to systemic contagion fears. The move is expected to ease concerns among depositors, but investors are still cautious about the potential risks in the market.
The S&P 500 futures are likely to face resistance at 4,000, possibly dropping to 3,800. The quick measures to support SVB depositors are positive, but the message that some institutions have similar issues to SVB will send a chill across equities. Some traders wonder how SVB slipped through the stress-testing regime when its mark-to-market loss at the end of 2022 was almost equivalent to the bank’s entire equity base.
Gold is seeing a much-needed boost, with a more than 3% rally since Wednesday's close. The precious metal could benefit further if the US authorities fail to contain the fallout. However, the longer-term influence is likely to remain with the Fed, and the focus is now on the US CPI data due on Tuesday for clues on the rate path for this year. The upside squeeze for S&P 500 futures is likely to find 4,000 too much of a hurdle, with a slide down toward the 3,800 area looking like the path of least resistance.
While SVB may be in gold’s driving seat for now, the Fed is likely to remain the primary longer-term influence. All eyes will be on US CPI data due Tuesday for clues on this year’s rate path.
