It’s effectively pulling money - liquidity - out of the economy, which can tighten the screws on the system. The Fed has already raised rates at the fastest pace in decades and made other moves to reverse its tremendous support for the economy during the pandemic. “SVB is a warning for the Fed that their actions are beginning to have an impact.” “There are starting to be cracks that are appearing,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth. Higher rates tend to hit hardest on investments seen as the riskiest and most expensive, such as cryptocurrencies, and are fueling the furor around money-losing Silicon Valley startups. Analysts have said it was in a relatively unique situation, but the collapse has still led to concerns that a broader banking crisis could erupt. The company, which served the industry surrounding startup companies, was trying to raise cash to relieve a crunch.
Regulators took over Silicon Valley Bank in a surprise midday move after shares of its parent company, SVB Financial, plunged more than 60% this week. The sharpest drops in the market were coming from the financial sector, where stocks tanked for a second day. The Dow Jones industrial average fell 1.1%, while the Nasdaq composite sank 1.8%.
That’s despite a highly anticipated report on Friday showing pay raises for workers are slowing and other signals Wall Street wants to see of cooling pressure on inflation. The Standard & Poor’s 500 dropped 1.4% to cap its worst week since September. Fear rattled Wall Street and stocks tumbled Friday on worries about what’s next to break under the weight of rising interest rates after the biggest U.S.
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