- As traders bet that the worst of the banking turmoil has passed, US stocks rallied into the close. Treasuries dropped. After a Russian fighter jet collided with a US drone, the S&P 500 recovered much of its lost gains in the late afternoon.
- Ratings company comments on the financial sector highlighted the fragile sentiment as markets were jolted by the largest bank failures in the United States since the financial crisis. The value of the dollar fell. The relief rally in banking stocks was stifled, with the KBW Bank Index ending the day up 3.2% after First Republic Bank triggered a volatility halt after S&P Global Ratings placed the company on watch negative. Following a trio of bank failures in recent days, Moody's Investors Service has reduced its outlook on the sector.
- Following data showing that inflation remained elevated in February, the two-year Treasury yield climbed to 4.2%, following a three-day swoon that was the largest in decades amid the turmoil. Swap traders now anticipate the Fed raising interest rates by a quarter percentage point. On Monday, the odds of an increase were nearly 50-50.
- The Cboe Volatility Index, or VIX, fell as much as 16% on Tuesday, the most since December 2021, as investors became less concerned about an expanding bank contagion. On Monday, the fear-index surpassed 30 for the first time this year. Trading volume was also reduced, reversing the previous day's year-to-date high.
- Treasuries have been whipsawed in recent days, with a measure of volatility reaching its highest level since 2009, and banking shares have plummeted as the failure of Silicon Valley Bank and two other US lenders prompted bets that the Federal Reserve will pause its rate hike cycle and even cut interest rates to stabilise the financial system.
