{"id":186755,"date":"2023-03-15T09:30:00","date_gmt":"2023-03-15T13:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=186755"},"modified":"2023-03-15T11:07:29","modified_gmt":"2023-03-15T15:07:29","slug":"the-bogeyman-is-back-for-banks-and-investor-sentiment","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/the-bogeyman-is-back-for-banks-and-investor-sentiment\/","title":{"rendered":"The Bogeyman is Back for Banks and Investor Sentiment"},"content":{"rendered":"\n

It looked yesterday like it might be safe to come out from under the covers, but the bogeyman is back today for the bank stocks and investor sentiment in general. He is spooking major European bourses, which are down 3-4% following the news that Credit Suisse’s (CS)<\/strong> largest shareholder, Saudi National Bank, said it cannot provide Credit Suisse with further financial help due to regulatory constraints.<\/p>\n\n\n\n

The inference for many, in the wake of yesterday’s disclosure by Credit Suisse that it found “material weaknesses” in its financial reporting processes for 2021 and 2022, is that Credit Suisse has bigger problems than meets the headline eye. Shares of Credit Suisse are down 26%.<\/p>\n\n\n\n

Accordingly, a risk aversion mindset has taken root in European markets and that has spilled over to the U.S.<\/p>\n\n\n\n

The S&P 500 futures are down 82 points and are trading 2.1% below fair value, the Nasdaq 100 futures are down 203 points and are trading 1.6% below fair value, and the Dow Jones Industrial Average futures are down 645 points and are trading 2.0% below fair value.<\/p>\n\n\n\n

In turn, the 2-yr note yield is down 32 bps to 3.88% and the 10-yr note yield is down 17 bps to 3.47%. The U.S. Dollar Index is up 1.0% to 104.63; and the CBOE Volatility Index is up 18.4% to 28.09.<\/p>\n\n\n\n

The spillover effect from Credit Suisse’s problems and worries about counterparty risks are evident in the bank stocks and not just the smaller\/medium-sized bank stocks. JPMorgan Chase (JPM) is down 3.4%, Goldman Sachs (GS) is down 3.5%, and Citigroup (C) is down 5.1%. The SPDR S&P Bank ETF (KBE) is down 4.6% and the SPDR S&P Regional Banking ETF (KRE)<\/strong> is down 4.8%.<\/p>\n\n\n\n

The banking issues are looming large over the market, fueling concerns about a spillover — and restrictive effect — on the global economy, as banks are apt to tighten the rein on lending standards and risk taking.<\/p>\n\n\n\n

That thinking, arguably, is why the equity futures market didn’t respond more enthusiastically to the weaker-than-expected economic data out of the U.S. this morning.<\/p>\n\n\n\n