Stock Market Today: Nasdaq Gains as Treasury Yields Collapse

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Stocks opened lower Monday as investors caught up on this weekend's onslaught of concerning headlines.

After closing down Silicon Valley Bank – a regional lender owned by SVB Financial Group (SIVB) – Friday, regulators over the weekend pulled the plug on Signature Bank (SBNY), a New York-based financial firm with ties to the cryptocurrency market. Officials, who cited systemic risk as the catalyst for the closures, took emergency measures to prevent contagion, but bank stocks were still among Wall Street's biggest decliners today.

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U.S. banking regulators from the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and the Treasury Department quickly came together over the weekend to develop a plan to limit risk to the banking sector following the failure of Silicon Valley Bank and Signature Bank. The efforts included covering all deposits for customers of the failed banks. The Fed also created a new emergency initiative that will offer short-term loans to banks, credit unions and other depository institutions in order to "provide an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress."

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And while these efforts will help avert a crisis in the financial system, bank stocks took a beating today. First Republic Bank (FRC, -61.8%) was among the day's biggest decliners, while regional banks Western Alliance (WAL, -47.1%) and PacWest Bancorp (PACW, -21.1%) also racked up sizable losses.

Elsewhere, Treasury yields collapsed as investors sought out safety in government bonds. The 10-year Treasury yield fell 14.6 basis points to 3.541%, while the yield on the 2-year note slumped 58.7 basis points to 3.999%. (A basis point = 0.01%.) Prices for gold futures (+2.6% to $1,916.50 an ounce) and gold stocks also climbed thanks to their safe-haven status.

The major indexes, meanwhile, managed to stabilize after a rough start. By the close, the Nasdaq Composite was up 0.5% at 11,188, while the S&P 500 slipped 0.2% to 3,855, and the Dow Jones Industrial Average gave back 0.3% to 31,819.

Inflation updates on deck

The failure of Silicon Valley Bank and Signature Bank appears to have been a result, in some part, of the Federal Reserve's aggressive rate-hiking efforts. Over the last 12 months, the Fed has lifted its short-term federal funds rate to a target range of 4.50% to 4.75% from 0.00% to 0.25%.

"For the Fed, the crisis comes at a pivotal time – investors are looking ahead to tomorrow's Consumer Price Index data and releases later this week for retail sales and the PPI [Producer Price Index] to assess whether the recent upswing in inflation is a persistent and widely entrenched issue," says José Torres, senior economist at Interactive Brokers. "Regardless of this week’s economic data, however, it's likely that the Fed has landed between a rock and a hard place as it must balance financial stability with its efforts to curtail inflation."

The next CPI report will be released ahead of tomorrow's open, while PPI and retail sales are due out Wednesday morning. The next Fed meeting starts Tuesday, March 21, with the market pricing in a 25 basis point interest rate hike, according to CME Group. The probability for a 50 basis point hike, meanwhile, has plunged to zero from 40.2% on Friday.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.