Investors continued to look desperately for a place to park their money as the banking crisis unfolded Monday, causing volatility in bonds, gold, the U.S. dollar and crude oil.
The closing of SVB Financial's Silicon Valley Bank and Signature Bank by regulators over the weekend added to investor worries. The Treasury Department, Federal Reserve and other agencies sought to shore up deposits and reassure markets.
Investors flocked to government bonds and gold as havens, with Treasury yields sinking the most since the 2008 financial crisis.
Short-term bond yields got hit the hardest, with the U.S. Treasury 2-year dropping to 4.161% from 4.586% Friday — on track for the biggest one day decline since 2008. The three-day decline is on pace for the largest drop since Oct. 22, 1987, according to Dow Jones Market Data.
The 10-year yield sank 15 basis points to 3.55% and is now testing the 200-day moving average. The 30-year fell 3.658%.
Dollar Rises As Traders Seek Shelter
The dollar fell against major currencies as the banking problems cut the odds of higher interest rates. The U.S. currency often follows moves in Treasury yields.
The WSJ Dollar Index, which tracks the dollar against a basket of currencies, fell 1%. Invesco DB U.S. Dollar Bullish fell 0.9% after meeting resistance at the 200-day line last week.
Traders quickly changed their expectations for the Federal Reserve's next interest-rate move, with over 64% now expecting only a 25-basis point hike in March, according to the CME FedWatch Tool.
Last week the projection was over 70% expecting a 50-basis point hike.
Goldman Sachs economists quickly changed their projection for the Federal Reserve's next interest rate move. They now expect no rate hike at the March meeting, according to the Wall Street Journal.
Gold Shines In Investors' Eyes
Gold futures — which act as a safe haven during financial uncertainty — rose 2.5%, to $1,913, hitting a four-week high.
Canada-based Gold and copper miner Barrick Gold popped 7.2% in heavy volume.
SPDR Gold Trust ETF gapped up 2.1%, also in heavy volume.
"With recent dollar weakness and crisis in the U.S., gold prices have been shooting higher," says Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott. "And we believe there may be more to go for the precious metal. We are watching for potential resistance targets toward $1,950-$2,000 on gold prices in the weeks/months ahead."
U.S. crude oil was down 2.8% to $74.51 per barrel. The price of crude seems to be reacting to fears of a slowdown in the economy.
The S&P 500, which has more exposure to banks than the Nasdaq, fell sharply at the open but reversed higher. It was up 0.6% in late trading.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
