Futures fell on Monday, erasing earlier gains as traders assessed a plan tobackstop all the depositorsin failed Silicon Valley Bank and make additional funding available for other banks.
The Dow Jones Industrial Average were down 234 points, or 0.7%. The S&P 500 lost 1%, while the Nasdaq Composite shed 0.8%.
Stock futures initially popped following the Sunday evening announcement of the banking rescue by regulators. The moves come as the Chicago Board Options Exchange’svolatility indexreached a level not seen since late 2022 and neared territory considered highly risky.
Bank stocks were under pressure, withJPMorgan ChaseandCitigroupfalling. Regional banksfell even more, led by a 60% drop inFirst Republic.
All Silicon Valley Bank depositors will haveaccess to their money starting Monday, according to a joint statement from the Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the joint statement said.
The Federal Reserve also 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.
Elsewhere, investors are watching various economic reports this week. Tuesday’s consumer price index report is the last major inflation data release ahead of the Fed’s next meeting, ending March 22. February retail sales and the producer price index are also on deck.
“Financial markets face a no-win situation, trapped between fears of regional bank runs and central banks worried about sticky inflation,” said Barclays analyst Ajay Rajadhyaksha in a note to clients.