“Worst Since Lehman”: Banks Break The World Again
Last week we detailed BofA’s Michael Hartnett’s warning that “The Fed will tighten until something breaks”.
Well, something just broke…
SVB’s collapse – the second biggest US bank failure in history – dominated any reaction to this morning’s mixed bag from the BLS (hotter than expected earnings growth, rising unemployment (especially for Latinos), better than expected payrolls gains).
Things started off badly as SVB crashed 65% in the pre-market before being halted. SVB bonds were puking hard and when the FDIC headline hit, the bonds collapsed further…
Source: Bloomberg
A number of small/medium sized banks were clubbed like a baby seal…
Source: Bloomberg
And the KBW regional bank index crashed (down 9 of the last 10 days and 20% in that period). The 18% drop this week was the index’s worst drop since Lehman (Sept 2008)…
Source: Bloomberg
And as you’ll see below, that started to have some notable impacts on the most arcane of global systemic risk red flag signals…
- TED Spread at YTD highs (systemic risk rising)
- Global USD Liquidity tightest in 2023 (foreigners paying up for USDollars)
- Global Bank Credit Risk rising
The worst week for stocks in 2023… On the week, all the US majors were down hard with Small Caps crashing 9%, S&P, Dow, and Nasdaq over 4% lower…
The Dow has been underwater on the year for over a week and is now down 4% in 2023. Today’s ugliness smashed the S&P 500 and Russell 2000 down to unchanged on the year…
Source: Bloomberg
All the US Majors are now back below their 200DMAs…
Unsurprisingly, financials were the week’s biggest sector laggards but all were red on the week…
VIX exploded higher on the day, back above 28 and recoupling with equity weakness…
Source: Bloomberg
…click on the above link to read the rest…
