The federal government is prepared to take additional actions if warranted, U.S. Treasury Secretary Janet Yellen said.
Yellen spoke more on the banking crisis yesterday — this time, though, there was a material difference in what she said.
In prepared remarks, Yellen reiterated before a House subcommittee that the federal government guaranteed deposits at Silicon Valley Bank and Signature Bank to "prevent contagion." Then, she added this all-important line: "We would be prepared to take additional actions if warranted." The statement doesn't contradict her comments from Wednesday — it's clearly not a promise to safeguard all deposits without congressional approval.
Her comments came late in the trading day but managed to reassure investors. The SPDR S&P Regional Bank ETF , a fund that tracks the performance of regional banks, ended the day down by 2.78%, but it had been down by as much as 7.7% before Yellen started talking. The major indexes made marginal gains. The S&P 500 added 0.29% and the Dow Jones Industrial Average inched up 0.23%. The tech-heavy Nasdaq Composite rose 1%, buoyed by tech stocks. Netflix was a standout, jumping 9%.
Compared to the past two weeks of banking turmoil, Thursday might have felt like a relatively quiet day. But Liz Young, head of investment strategy at SoFi, has a warning. "Even if the banking woes have been contained and the deposit flight is over, I don't think they'll prove to be the only set of headlines that pose risks to the economy," she wrote. We might, then, just be in the eye of a storm.
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