US Treasury Secretary Janet Yellen testifies before a subcommittee on March 23, 2023 in Washington, DC.
Alex Wong | News from Getty Images | Getty Images
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Yellen leaves open the prospect of protecting banks.
- US Treasury Secretary Janet Yellen said yesterday the federal government stands ready to take contingency measures to support regional banks, just as it did for Silicon Valley Bank and Signature Bank. Her comments struck a different note from the day before, when when asked by a senator if the Treasury Department was considering guaranteeing all bank deposits without Congressional approval, Yellen replied that it was not.
- Stocks in the US made marginal gains in a turbulent trading session on Thursday as traders bet that rate hikes would soon end. However, Asia-Pacific markets traded mostly lower on Friday. Japan’s Nikkei 225 fell 0.38% as the country’s factory activity contracted for a fifth straight month in March, according to a flash estimate by au Jibun Bank.
- PROFESSIONAL Bitcoin is now at $28,300.74, a level not seen since June. Analysts believe the skyrocketing price carries a message about markets’ interest rate expectations.
Yellen spoke more about the banking crisis yesterday – but this time there was a key difference in what she said.
In prepared remarks, Yellen reiterated before a House subcommittee that the federal government had guaranteed deposits at Silicon Valley Bank and Signature Bank to “prevent contagion.” She then added this all-important line: “We would be prepared to take additional action if warranted.” The statement doesn’t contradict her comments Wednesday — it’s clearly not a promise to secure all deposits without Congressional approval. But it showed the willingness of the federal government to intervene if necessary.
Her comments came late in the trading day but managed to reassure investors. The SPDR S&P Regional Bank ETF (KRE), a fund that tracks the performance of regional banks, ended the day down 2.78%, but was down as much as 7.7% before Yellen spoke.
The major indices made marginal gains. The S&P 500 was up 0.29% and the Dow Jones Industrial Average was up 0.23%. The tech-heavy Nasdaq Composite rose 1%, helped by tech stocks. Netflix stood out, rising 9%.
Compared to the banking turmoil of the past two weeks, Thursday may have felt like a relatively calm day. But Liz Young, head of investment strategy at SoFi, has a warning. “Even if banking problems have been contained and the deposit flight is over, I don’t think they will prove to be the only headlines that pose a risk to the economy,” she wrote. We could just be in the eye of a storm then.
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