U.S. regulators came to the rescue of Silicon Valley Bank depositors late Sunday, triggering a modest relief rally in stock-index futures. But investors were left to weigh the outlook for Federal Reserve rate increases after the central bank’s aggressive tightening was flagged by economists and analysts for setting the stage for the second-largest bank failure in U.S. history.
Federal regulators said depositors at Silicon Valley Bank, or SVB, would have access to all deposits on Monday morning. That includes uninsured deposits — those exceeding the FDIC’s $250,000 cap — in a move that analysts said would help avert runs similar to the event that capsized SVB from occurring elsewhere. SVB
stock and bondholders, however, will be wiped out. Regulators said New York’s Signature Bank was also closed on Sunday and that its depositors would also be made whole. The Fed also announced a new emergency loan program that it said would help assure banks have the ability to meet the needs of all their depositors. A deal that spared depositors would be expected to let stocks “rally strongly,” said Barry Knapp, managing partner and director of research at Ironsides Macroeconomics, in a phone interview ahead of the announcement Sunday afternoon. Conversely, measures that would have forced depositors to take a hit would have had the potential to spark an ugly reaction, he said. Futures on the Dow Jones Industrial Average
rose 240 points, or 0.8% following the announcement, while S&P 500 futures
were up 1% and Nasdaq-100 futures
gained 1.3%. Investors will also be assessing the fallout to see if it complicates the Federal Reserve’s plans to hike interest rates further and potentially faster than previously expected in its bi …