On Monday’s pre-open trading, futures are surging due to the announcement of regulatory measures aimed at addressing the aftermath of the SVB Financial Group (NASDAQ: SIVB) collapse, which was caused by systematic risks. The Federal Deposit Insurance Corporation (FDIC) acted swiftly to safeguard uninsured depositors in Silicon Valley Bank and Signature Bank (NASDAQ: SBNY). At the same time, the Fed and Treasury introduced the Bank Term Funding Program (BTFP) to provide extra liquidity.
According to a Goldman Sachs economist, these measures are expected to offer significant liquidity to banks facing deposit outflows, as well as improve depositor confidence. Given these recent developments, Goldman Sachs no longer predicts that the Fed will raise rates during next week’s meeting, citing “considerable uncertainty” regarding the path beyond March.
Goldman Sachs maintains its expectation of 25bp hikes in May, June, and July, and now predicts a 5.25-5.5% terminal rate. Nonetheless, the bank acknowledges the uncertainty surrounding the path. As a result, the S&P 500 futures are up 1.6% in pre-market trading, with Nasdaq and Dow Jones futures trading 1.7% and 1.15% higher, respectively.
