By Yasin Ebrahim
Investing.com – The Dow closed lower Monday, as investors weighed up a sharp drop in Treasury yields amid bets of a less aggressive Federal Reserve and ongoing turmoil in the banking sector despite the rescue of SVB.
The Dow Jones Industrial Average fell 0.3%, or 90 points, the Nasdaq Composite rose 0.5%, the S&P 500 fell 0.1%.
Treasury yields plummeted, with the 2-year Treasury falling more than 60 basis points slipping below 4% to six-week lows as investors bet that the turmoil in the banking sector may force the Fed to rethink its rate hike path.
“Fed funds futures are reducing pricing for the size of a potential hike at that meeting to be closer to 25bps,” Scotia Economics said in a note. Before the turmoil in the banking sector began to unfold over the back half of last week the market had been pricing most of a 50bps move, Scotia Economics added.
Goldman Sachs, meanwhile, believes the Fed isn't likely to hike at all in March, citing the stresses in the banking system. The odds of the Fed pausing hikes at its meeting next week jumped to 47%, according to Investing.com's Fed Rate Monitor Tool.
Following the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY), the U.S. government and Federal Reserve stepped to rescue the beleaguered banks, agreeing to backstop all depositors.
The Fed also launched a new funding program offering loans with maturities of up to year.
The support from the Fed failed to stem the turmoil in banks, however, with First Republic Bank (NYSE:FRC) falling more than 60%, while shares of major banks including JPMorgan Chase & Co (NYSE:JPM), BAC, and Citigroup (NYSE:C) (NYSE:C) also down sharply.
Tech stocks, however, helped the broader market recovery underpinned by the fall in Treasury yields.
Microsoft (NASDAQ:MSFT) was up 2%, Apple (NASDAQ:AAPL) up more than 1% following by Meta Platforms (NASDAQ:META) and Google-parent Alphabet (NASDAQ:GOOGL).
In other news, Roku (NASDAQ:ROKU) closed lower after the company said Friday it revealed it had about $487 million, or 26%, of its cash reserves stuck at Silicon Valley Bank.
In deal news, Seagen (NASDAQ:SGEN) jumped than 14% on news the health-care company will be acquired by Pfizer (NYSE:PFE) to boost the latter’s cancer treatment portfolio.