March S&P 500 futures (ESH23) are down -1.2%, and March Nasdaq 100 E-Mini futures (NQH23) are down -0.91% this morning as investors weighed the emergency measures presented by the U.S. financial authorities on Sunday to shore up confidence in the banking system while also bracing for crucial U.S. inflation data due this week.
In Friday’s trading session, Wall Street’s major indexes ended down over -1% as financial sector jitters weighed on sentiment amid the SVB saga, with the benchmark S&P 500 notching its largest weekly percentage loss since September, the blue-chip Dow dropping to a 4-month low, and the tech-heavy Nasdaq falling to a 6-week low.
Data on Friday showed the U.S. economy added 311K jobs last month, above expectations of 225K. At the same time, the U.S. unemployment rate unexpectedly ticked higher to 3.6% in February, compared to expectations of 3.4%. Also, average hourly earnings rose +0.2% m/m and +4.6% y/y in February, weaker than expectations of +0.3% m/m and +4.7% y/y.
U.S. banking regulators on Friday closed SVB Financial Group, appointing the Federal Deposit Insurance Corporation as receiver to protect depositors after a startup-focused lender failed to shore up its balance sheet through a stock sale on Wednesday. In addition, New York state financial regulators closed crypto-focused Signature Bank on Sunday amid systemic risk, the third largest failure in U.S. banking history.
The Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp. on Sunday jointly announced measures to stabilize the banking system and said SVB customers would have access to all their deposits starting Monday. The Fed launched a new “Bank Term Funding Program” that offers one-year loans to depository institutions under easier terms. In addition, the Fed eased terms for lending through its discount window.
Despite this, shares of First Republic (FRC) are plummeting 65% and Western Alliance Bancorp (WAL) shares are tumbling 62% in the pre-market.
On the ground of the most recent developments, Goldman Sachs said on Sunday that the Fed would hold off from raising interest rates at next week’s meeting.
“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22. We have left unchanged our expectation that the FOMC will deliver 25bp hikes in May, June, and July and now expect a 5.25-5.5% terminal rate, though we see considerable uncertainty about the path,” a Goldman Sachs economist wrote in a client note.
Meanwhile, U.S. rate futures have priced in an 81.9% chance of a 25 basis point rate increase and an 18.1% chance the Fed holds steady at the upcoming meeting.
In the coming week, U.S. CPI data for February will be the main highlight. In addition, market participants will be eyeing a spate of economic data, including the U.S. Core CPI, PPI, Core PPI, Core Retail Sales, NY Empire State Manufacturing Index, Retail Sales, Business Inventories, Crude Oil Inventories, Building Permits (preliminary), Export Price Index, Import Price Index, Housing Starts, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Industrial Production, Manufacturing Production, Michigan Consumer Expectations (preliminary), Michigan Consumer Sentiment (preliminary).
The U.S. economic data slate is mainly empty on Monday.
In the bond markets, United States 10-Year rates are at 3.596%, down -2.68%.
The Euro Stoxx 50 futures are down -2.02% this morning as bank stocks continued to plunge in the region on concerns over the resilience of the sector’s balance sheet after SVB’s collapse. Also, HSBC said on Monday that it was acquiring the British arm of Silicon Valley Bank for 1 pound. Investor focus is now on the European Central Bank monetary policy meeting due later this week. The ECB is still expected to hike interest rates by another 50 basis points after recent data pointed to elevated inflation in the region.
The European economic data slate is largely empty on Monday.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.20%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.11%.
China’s Shanghai Composite today closed higher as investors digested more evidence of the country’s economic recovery after China reported unexpectedly strong credit growth in February. Also, China’s new Premier, Li Qiang, sought to reassure the private sector, promising easier policies. In addition, President Xi Jinping retained the head of the central bank and finance minister in their posts. However, Chinese property stocks plunged after heavyweight Country Garden Holdings Company Ltd said it expects to log a hefty loss in 2022 because of a downturn in the sector.
At the same time, Japan’s Nikkei 225 Stock Index closed in the red as bank stocks dragged the broader market lower. The index’s downward momentum was fueled by losses in the Banking, Shipbuilding, and Insurance sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 0.28% to 17.89.
Pre-Market U.S. Stock Movers
First Republic Bank (FRC) tumbled over -52% in pre-market trading following the weekend collapse of Signature Bank and Friday’s closure of SVB Financial.
Nikola Corp (NKLA) climbed more than +3% in pre-market trading after Morgan Stanley initiated coverage on the stock with an equal weight rating.
Merck & Company Inc (MRK) dropped about -1% in pre-market trading after Wells Fargo downgraded the stock to equal weight from overweight.
Truist Financial Corp (TFC) rose over +2% in pre-market trading after Keefe Bruyette upgraded the stock to market perform from underperform with a price target of $45.
Cingulate Inc (CING) plunged more than -15% in pre-market trading after the company filed to sell 8.62M shares of common stock.
British American Tobacco PLC ADR (BTI) fell over -2% in pre-market trading after JPMorgan downgraded the stock to neutral from overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - March 13th
Alimentation Couchen A (ANCTF), Brazilian Electric Power DRC (EBR), MTN Group Ltd PK (MTNOY), Ivanhoe Mines (IVPAF), Gitlab (GTLB), Yamana Gold (AUY), Industrias Penoles (IPOAF), Dlocal (DLO), Sprott Physical Gold and Silver Trust (CEF), Cvent Holding (CVT), Rostelekom DRC (ROSYY), Diversey Holdings (DSEY), ZIM Integrated Shipping Services (ZIM), Amylyx Pharmaceuticals (AMLX), Getty Images Holdings (GETY), Protagonist Therapeutics (PTGX), Noah (NOAH), Semrush Holdings (SEMR), Navigator Holdings (NVGS), BELLUS Health Inc. (BLU), DocGo (DCGO), Avid Bioservices (CDMO), Eaton Vance Tax Manag Glb Buy Write (ETW), RAPT Therapeutics (RAPT), LivePerson (LPSN), Bluegreen Vacations Holding (BVH), Inspired Entertainment (INSE), Eagle Pharm (EGRX).
More Stock Market News from Barchart
- SVB Collapse, CPI and other Key Themes to Watch this Week
- 5 Lessons Learned From Silicon Valley Bank’s Collapse
- Energy and Gold Stocks Attracting Investor Attention as Financials Take Hit
- Stocks Slump on Contagion Risk from the Silicon Valley Bank Collapse
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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