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. But it showed the federal government's willingness to step in if necessary.
Her comments came late in the trading day but managed to reassure investors. The SPDR S&P Regional Bank ETF (KRE), 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.
