Banking tremors surrounding First Republic Bank trigger bearish signals on the stock market
Will this never end? Just when one believes the banking crisis is resolved, the next concern emerges in San Francisco. First Republic Bank reports an “unprecedented outflow of deposits” in its latest quarterly report. While these amounted to approximately 176 billion dollars at the end of 2022, they had fallen to just 104 billion dollars by the end of March 2023. This included 30 billion dollars stemming from an emergency action initiated by several major banks, including JP Morgan Chase.
Customer trust squandered
The bank’s share price plummeted immediately thereafter, falling by more than 40% last Tuesday. Overall, the stock has lost around 90% of its value since the beginning of March. First Republic Bank attempted to reassure investors, emphasizing that deposits had remained largely stable since the end of March. At the same time, it took out expensive loans, including from the US Federal Reserve, to compensate for dwindling deposits. The institution is currently planning a comprehensive austerity program, which includes cutting 20 to 25% of all positions at the bank. What does such news do to customer confidence?
The events surrounding First Republic Bank are triggering fear and unsettling the markets. Consequently, the regional bank index fell to a new low. US futures also showed weakness on Wednesday, marking a new session low despite after-hours price increases from Alphabet and Microsoft. Furthermore, the market breadth of the US stock exchanges sent a brief, bearish signal when 86.5% of the total trading volume was accounted for by stocks whose prices were declining.
Commodities as "bear tamers"
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