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SVB Contagion Fears Hit Markets

US financial stocks have seen a sharp shift in sentiment this week. Hawkish comments from Fed’s Powell earlier in the week have fuelled expectations of a larger .5% hike from the Fed when it meets later this month. However, the main driver of losses this week was the market reaction to news yesterday that Silicon Valley Bank is looking to plug a roughly $1.75 billion loss linked to the losses suffered on covering a bond portfolio.
 

JPM Investors Panicked

The news fuelled a swift move lower in SVB shares which fell over 60% on the day.  With fears that the bank could go under, US banking stocks are dealing with contagion fears and the risk of a much deeper fallout. JP Morgan shares were seen cratering lower by more than 7% on the day as US banking stocks suffered widespread losses. JPM shares are now down more than 14% from YTD highs and with a court order yesterday that JP CEO Jamie Dimon turn over more documents relating to his involvement with Jeffery Epstein, investor sentiment is weakening quickly.
 

Downside Risks

Looking ahead, JPM shares look vulnerable to further losses around today’s US jobs data and with the SVB situation ongoing. Unless jobs fell back drastically last month and there is a swift resolution to the SVB crisis, the bearish pressure is likely to continue near-term.
 

Technical Views

JPM

(Click on image to enlarge)

After stalling along the 142.12 level resistance over the last two months, JPM shares are now pulling away lower. Price has broken down through the rising trend line and is now testing the 128.58 level support. With momentum studies turned bearish, the focus is on a further move lower with a break of current support opening the way for 116.02 next. 

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