Troubling news from a company with deep ties to both the tech and financial sectors is pushing stocks down today. SVB Financial Group (NASDAQ:SIVB), the parent company of Silicon Valley Bank, plunged more than 40% today in pre-market trading after the bank reported an inability to provide cash to its depositors.
The company sought to raise the funds it needed through a new share offering and by selling off parts of its bond portfolio. Unfortunately, this news did not reassure investors and posed a stark opposite effect. Stocks are down across the board as panic continues to spread, pushing the the financial sector down particularly hard. Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) are in the red, and things don’t seem to be looking up.
That could be because with each new headline, things get worse for Silicon Valley Bank. Earlier this afternoon, Nasdaq halted trading on SIVB stock as fears of a bank run continued to mount. But earlier this afternoon, news broke that the U.S. government had seized control of the bank itself, leaving investors with even more unanswered questions as the bank closes.
The Forces Pushing Stocks Down Today
It’s not hard to assess why stocks are down today, as almost every headline points to the Silicon Valley Bank fiasco. In a now-deleted Tweet, noted investor Michael Burry compared it to the disaster that sunk Enron in 2007. But as Axios notes, it really represents the “largest bank failure since Washington Mutual in 2008.”
The scenario of worried customers overwhelming a bank by rushing it to withdraw their funds has often been compared to the classic film It’s a Wonderful Life, in which the same situation unfolds.
Unfortunately for Silicon Valley bank, it doesn’t seem like anyone is coming to bail it out, despite what hedge fund titan Bill Ackman advised in a series of tweets. But this banking disaster is also unfortunate for investors who didn’t have money deposited in the bank of invested in SIVB stock.
A fiasco of this magnitude has the power to sink entire markets, and that’s exactly what it is doing today. The dust is still settling, and while it does, today’s events will keep pushing stocks down.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.