Yesterday saw a significant drop in US stock indexes, led by Nasdaq. This caused widespread sell-offs around the globe. A ~2% drop in the stock market isn’t all that unusual, but this time it was caused by a massive drop in the banking sector. Forex traders will do well to pay attention when banks are in trouble. Banks are the ones who process all of the money.
What has happened?
This is due to some bad news from Silicon Valley Bank, a bank that is not well-known outside of the tech startup sphere. It is owned by SVB Financial, but is most commonly called simply SVB. The news sparked panic in the tech industry, as well as concerns among US retail banks. This concern spread to all major financial institutions. The cause of the crisis at SVB wasn’t immediately apparent, and many investors are worried about the general situation of the banks as the Fed tries to drain liquidity from the market.
The issue came to light when SVB’s parent announced that it had sold $21B in securities from its portfolio, followed by a filing to sell $2.25B in shares to shore up its capital position. The stock’s price plunged 60%, which was followed by a filing to sell $2.25B in shares. This was due to the banks not being able to finance the sale. This is the reason why…