Stocks Weighed Down by Bank Jitters

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.62%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.62%.

U.S. stock indexes this morning added to Thursday’s sharp losses, with the S&P 500 falling to a 1-month low, the Dow Jones Industrials dropping to a 4-month low, and the Nasdaq 100 sliding to a 1-week low. 

Losses in bank stocks are leading the market lower on liquidity concerns and the potential fallout from the plunge in SVB Financial Group after the bank took steps to shore up its capital on Thursday. Trading in SVB Financial has been halted this morning as the company is in talks to sell itself after attempts to raise capital amid a bank run failed.  A run on the bank ensued today after Peter Thiel’s Founders Fund and other prominent fund managers advised businesses to withdraw their money from the bank.  SVB has its own particular problems, but the financial industry as a whole is seeing strains from the Fed’s aggressive rate-hike regime.

Stocks saw underlying support from today’s U.S. Feb unemployment report, which showed an unexpected increase in the unemployment rate and weaker-than-expected hourly earnings, although payrolls showed a larger-than-expected increase. The report dampened speculation that the Fed will accelerate its pace of interest rate hikes. 

The turmoil in the U.S. banking sector has fueled safe-haven demand for government debt and knocked bond yields lower.  Bond yields fell further after this morning’s U.S. Feb unemployment report showed a smaller-than-expected increase in wages.  The 10-year T-note yield tumbled to a 3-1/2 week low of 3.683%. Also, expectations for a +50 bp rate hike at the Mar 21-22 FOMC meeting dropped to under 50%.

U.S. Feb nonfarm payrolls rose +311,000, stronger than expectations of +225,000.  The Feb unemployment rate unexpectedly rose +0.2 to 3.6% versus expectations of no change at 3.4% as the Feb participation rate climbed to 62.5% from 62.4% in Jan.

U.S. Feb average hourly earnings rose +0.2% m/m and 4.6% y/y, slightly weaker than expectations of +0.3% m/m and +4.7% y/y.

Bitcoin (^BTCUSD) is down more than -1% at a 1-3/4 month low today on negative carryover from Thursday when Silvergate Capital said it plans to wind down operations and liquidate its bank.  In addition, an escalating U.S. regulatory crackdown on crypto is also hurting market sentiment, with the U.S. Securities and Exchange Commission (SEC) contending that many crypto coins are securities, a designation that would potentially make them harder to trade. 

Overseas stock markets are lower.  The Euro Stoxx 50 today is down -1.82%.  China’s Shanghai Composite stock index closed down -1.40%, and Japan’s Nikkei Stock Index closed down -1.67%. 

Today’s stock movers…

Bank stocks are under pressure this morning on the concern about rising financial risks in the banking sector after the collapse of Silvergate Capital and SVB Financial Group.  First Republic Bank of California (FRC) is down more than -15% to lead losers in the S&P 500, and Signature Bank of New York (SBNY) is down more than -12%.  Also, Huntington Bancshares (HBAN), Zions Bancorp (ZION), and Truist Financial (TFC) are down more than -4%.  In addition, Comerica (CMA) and Fifth Third Bancorp (FITB) are down more than -3%. 

Oracle (ORCL) is down more than -4% after reporting Q3 cloud license and on-premise license revenue of $1.29 billion, weaker than the consensus of $1.38 billion. 

DocuSign (DOCU) is down more than -19% after forecasting Q1 billings of $615 million to $625 million, below the consensus of $625.1 million. 

The Gap (GPS) is down more than -6% after reporting Q4 net sales of $4.24 billion, below the consensus of $4.36 billion. 

Caterpillar (CAT) is down more than -3% to lead losers in the Dow Jones Industrial after UBS downgraded the stock to sell from neutral, saying its growth momentum is not strong enough to justify its valuation. 

Stratasys (SSYS) has rallied more than +12% after Nano Dimension offered to buy the rest of Stratasys stock that it doesn’t already own for $18 per share in cash, a 28% premium to Thursday’s close.   

Drug stocks and pharmaceutical makers are stronger on a defensive play as investors flee the turmoil in financial stocks.  Vertex Pharmaceuticals (VRTX) is up more than +2% to lead gainers in the Nasdaq 100.  Also, Amgen (AMGN), Moderna (MRNA), AbbVie (ABBV), Merck & Co (MRK), and Regeneron Pharmaceuticals (REGN) are up more than +1%.

Newmont (NEM) is up more than +3% to lead gainers in the S&P 500 due to strength in metals prices, with silver up more than +2% and gold up more than +1%. 

Roblox (RBLX) climbed more than +3% in pre-market trading after Jeffries upgraded the stock to buy from hold.

Across the markets…

June 10-year T-notes (ZNM23) today are up +1-14/32 points, and the 10-year T-note yield is down -17.6 bp at 3.727%. June 10-year T-notes this morning rallied sharply to a 3-1/2 week high, and the 10-year T-note yield plunged t a 3-1/2 week low of 3.683%.  Strong demand for government debt amid signs of turmoil in the U.S. banking sector is fueling today’s rally in T-notes.  Gains in T-notes accelerated after today’s U.S. Feb unemployment report showed Feb average hourly earnings rose less than expected, dampening wage pressures. 

The dollar index (DXY00) today is down by -0.85%.  The dollar this morning is tumbling on a plunge in T-note yields.  The dollar is also under pressure after today’s U.S. Feb payroll report showed an unexpected increase in the unemployment rate, which makes it unlikely that the Fed will ramp up the pace of its interest rate hikes.

EUR/USD (^EURUSD) today is up by +0.78%.  The euro today is climbing as weakness in the dollar has sparked short covering in EUR/USD.  Gains in the euro are limited after the 10-year German bund yield dropped to a 3-week low today, weakening the euro’s interest rate differentials.

USD/JPY (^USDJPY) today is down by -0.98%.  The yen today recovered from overnight losses and rallied to a 2-week high.  A plunge in T-note yields today has sparked short covering in the yen.  Also, liquidity concerns in the U.S. banking sector have sparked some repatriation demand for the yen by Japanese investors.  The yen initially moved lower today after the BOJ maintained QE and kept interest rates at a record low following today’s BOJ meeting.  Also, comments from BOJ Governor Kuroda initially weighed on the yen when he said, "it's still too early to discuss an exit" from its easy monetary policy. 

Japan’s economic news today was bearish for the yen.  Jan household spending fell -0.3% y/y, weaker than expectations of -0.1% y/y.  Also, Feb PPI eased to +8.2% y/y from +9.5% y/y in Jan, weaker than expectations of +8.4% y/y and the smallest pace of increase in 16 months.

The BOJ voted 9-0 to keep its policy balance rate at -0.1% and to maintain its 10-year JGB yield target at about 0%. 

April gold (GCJ3) this morning is up +27.8 (+1.52%), and May silver (SIK23) is up +0.495 (+2.45%).  Precious metals prices this morning are sharply higher.  A slump in the dollar today is bullish for metals prices.  Also, today’s slump in global bond yields is supportive of metals.  In addition, the turmoil in the U.S. banking sector has boosted safe-haven demand for precious metals.  A bearish factor for gold is the continued liquidation of long gold positions in ETFs after gold holdings fell to a new 2-3/4 year low Thursday. 

• 3 Reasons Why the Bulls May be Targeting Coursera (COUR)
• Markets Today: Stocks Rally as Concern Eases About Aggressive Fed
• These 3 Stocks Recently Increased Both Their Dividends and Stock Buybacks
• Bear Put Spread Screener Results For March 10th