[Good Morning Stock Market] SVB Bankruptcy Aftershocks Continue... Market Sentiment Weakens

Dow down 0.28%, Russell 2000 down about 1.6%
US Expected Inflation Revised Downward...Some Large Tech Stocks Strengthen

The U.S. stock market continued to show a volatile trend despite the government's proactive response to the Silicon Valley Bank (SVB) bankruptcy crisis. Market participants are growing hopeful that the direction of interest rate hikes may change due to this incident, while still maintaining caution toward risk assets.

[Image source=Reuters Yonhap News]

Sangyoung Seo, Researcher at Mirae Asset Securities: “SVB Crisis Impact Continues... Expecting a Decline in the 1% Range at the Start”

On the previous day, the U.S. stock market showed weakness despite the U.S. government authorities' announcement of solutions to the SVB crisis. During the session, small and mid-sized banks emphasized their liquidity abundance and denied the possibility of selling unrealized loss bonds, distinguishing themselves from SVB, which helped reduce the intraday losses significantly. The worst-hit bank, which had plunged over 46% at one point, closed down 17%, and Charles Schwab, which had fallen nearly 50%, ended the day down 12%.

Market participants believe that, considering the confidence of other banks, the issue will not escalate into a systemic problem, but concerns about bank runs (mass withdrawals) will persist. Attention should be paid to the Russell 2000 index, a small and mid-cap index, which fell 1.6% despite the strength of large tech stocks. Given that bank runs continued at Continental Illinois Bank even after deposit guarantees following its bankruptcy in May 1984, it seems more time is needed for investor sentiment toward risk assets to recover. Accordingly, the KOSPI is expected to show a decline in the 1% range on this day.

However, the weakening of the New York Fed's 1-year expected inflation rate (from 4.95% to 4.23%) has eased concerns about aggressive interest rate hikes, leading to strength in tech stocks. Companies with solid financial statements showed gains, led by MS (2.41%), Apple (1.33%), Amazon (1.87%), Alphabet (0.53%), and Meta Platforms (0.77%). This is expected to drive the rise of financially robust companies in the market that day.

Jaegu Kang, Researcher at Hanwha Investment & Securities: “Large Growth Stocks to Attract Attention After SVB Crisis”

The SVB crisis allowed market participants to confirm the soundness of the U.S. financial system and the government's swift response. The U.S. government decided on SVB's bankruptcy and depositor protection just two days after the liquidity crisis emerged, and the prompt and appropriate measures highlighted the stability of U.S. investments.

In the short term, investment sentiment may contract. Especially since the Federal Reserve (Fed) has not officially mentioned a change in its high-intensity monetary policy stance, more bank failures could occur. To alleviate investors' concerns, the Fed's stance needs to be confirmed at the March FOMC meeting.

However, the market expects the Fed to slow the pace of tightening due to this incident. On the 10th, the probability of a 50 basis point hike at the March FOMC was 40.2%, but as of the 13th, it has shifted to 0%. If the Fed's high-intensity monetary policy stance changes as market participants expect, the burden on growth stock investments is likely to ease somewhat. Given the market's instability, investment sentiment is expected to focus on large growth stocks such as Apple, Microsoft, and Alphabet.

This content was produced with the assistance of AI translation services.