Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading on February 01, 2023 in New York City.
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Stock futures jumped Sunday evening after regulators announced a plan to backstop all the depositors in failed Silicon Valley Bank and make additional funding available for other banks.
S&P 500 futures gained 1.3% and Nasdaq 100 futures rose 1.4%. Futures tied to the Dow Jones Industrial Average were up by 310 points.
The Federal Reserve said it is creating a new Bank Term Funding Program aimed at safeguarding deposits The facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions.
“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”
Along with the facility, the Fed said it will ease conditions at its discount window, which will use the same conditions as the BTFP.
The major indexes are coming off a losing week after the collapse of SVB sent shockwaves through the stock market. The Dow on Friday dropped 345 points, or 1.07%. The S&P 500 shed 1.45% and the Nasdaq Composite fell 1.76%. All of the major averages posted weekly losses, with the Dow finishing its worst week since June.
“Bears came out of hibernation after waking up to a warning shot from the banking space,” said Adam Turnquist, chief technical strategist for LPL Financial. “Contagion risk stemming from the collapse of SVB Financial triggered a sell now — ask questions later backdrop for stocks.”
The yield on the 2-year Treasury note fell sharply last week, posting its biggest 2-day drop since 2008 as SVB’s shutdown sparked a flight to safer assets like government bonds.
“While Treasury yields pulled back sharply this week and violated several key support levels, there is little silver…
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