S&P 500 Edges Lower as Investors Rethink Fed’s Rate Path

 S&P 500 Edges Lower as Investors Rethink Fed’s Rate Path - WSJ   Major U.S. stock indexes held relatively steady Monday while investors attempted to assess what newfound stress in the banking system would mean for Federal Reserve policy.

Regional bank stocks plunged, and investors piled into government bonds to seek safety after regulators took extraordinary measures over the weekend to limit the impact of the collapse of Silicon Valley Bank. 

The Treasury Department, the Fed and the Federal Deposit Insurance Corp. guaranteed the deposits of SVB, which collapsed after an attempt to raise capital led to a bank run. Regulators also said they had taken control of Signature Bank, which serves many cryptocurrency companies.

Yet stock investors found a possible silver lining in the tumult: The rescue plan appeared to shift—at least temporarily—the calculus on the path of the Fed’s interest-rate increases.

The S&P 500 closed down 5.83 points, or 0.2%, at 3855.76, for its third straight day of losses. The Dow Jones Industrial Average slipped 90.50 points, or 0.3%, to 31819.14. The tech-heavy Nasdaq Composite added 49.96 points, or 0.4%, to 11188.84. 

Investors in interest-rate futures markets now see a greater than one-in-three chance that the Fed will hold rates steady at its meeting next week, according to CME Group. Last week, they were positioning for the central bank to either raise rates by a quarter-percentage point, as it did last month, or by a half-point, as it did in December. 

Some investors are even again hoping the Fed will cut interest rates this year, a sharp shift in policy that would likely propel a rally in stocks. Technology shares, which are typically most sensitive to higher interest rates, advanced Monday.

Former Goldman Sachs Group Chief Executive Lloyd Blankfein said on Twitter that he sees a potential slowdown in Fed increases as a tailwind for markets.. . .