Stocks Jump as Bank Stocks Rebound and U.S. Consumer Prices Ease

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +1.67%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.83%.

U.S. stock indexes this morning are sharply higher as bank stocks rally on hopes that the worst of the banking sector turmoil has passed.  Stock indexes maintained their gains after the pace of U.S. Feb consumer prices eased and came in right on expectations.  Fed fund futures have now priced a 25 bp rate hike at next week’s FOMC meeting.

U.S. Feb CPI rose +0.4% m/m and +6.0% y/y, right on expectations, with the +6.0% y/y gain the smallest year-on-year increase in 17 months.  Feb CPI ex-food and energy eased to +5.5% y/y from +5.6% y/y in Jan, right on expectations and the slowest pace of increase in 14 months.

Positive corporate news is also supporting gains in stock index futures.  Bunge is up more than +13% after it was announced that it would replace Signature Bank of New York in the S&P 500 before trading on Wednesday.  Also, Uber and Lyft are up more than +6% after a Californian appeals court upheld the current law classifying gig workers as independent contractors instead of employees.   In addition, Meta Platforms is up more than +5% after announcing about 10,000 job cuts and closing around 5,000 additional open positions.

On the negative side, United Airlines Holdings is down more than -4% after it cut guidance for Q1 and now said it expected an adjusted loss per share in Q1.   Also, Gitlab plunged more than -30% after forecasting 2024 revenue well below consensus. In addition, Alaska Air Group is down more than -2% after cutting guidance on Q1 adjusted pretax margin.

Bitcoin (^BTCUSD) is up sharply by more than +7% today to a 9-month high on optimism that U.S. authorities' actions taken Sunday will stem any contagion risks from the U.S. banking crisis. Data from the derivatives trading site Coinglass shows that more than $280 million in short crypto positions were liquidated in the past 24 hours.

This morning’s stock rebound has sapped the safe-haven demand for government debt and pushed bond yields higher.  As a result, the 10-year T-note yield today is up +7.4 bp at 3.647%.  Also, the 10-year German bund yield is up +19.0 bp at 2.449%, and the 10-year UK gilt yield is up +14.4 bp at 3.515%.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +1.92%.  China’s Shanghai Composite stock index closed down -0.72%, and Japan’s Nikkei Stock Index closed down -2.19%. 

Today’s stock movers…

First Republic Bank (FRC) is up more than +48% to lead gainers in the S&P 500 as it recovers some of its sharp losses over the last three sessions. 

Bank stocks are climbing this morning as the market stabilizes after the selloff seen in the sector over the past two sessions.  KeyCorp (KEY) is up more than +15%, and Zions Bancorp (ZION) is up more than +13%.  Also, Charles Schwab (SCHW), Truist Financial (TFC), Citizens Financial Group (CFG), Comerica (CMA), Citigroup (C), Synchrony Financial (SYF), Fifth Third Bancorp (FITB), and Wells Fargo (WFC) are up +5% or more.

Bunge (BG) is up more than +13% after it was announced that it would replace Signature Bank of New York in the S&P 500 before the opening of trading on Wednesday.

Meta Platforms (META) is up more than +5% after announcing about 10,000 job cuts and closing around 5,000 additional open positions.

Uber (UBER) and Lyft (LYFT) are up more than +6% after a Californian appeals court upheld the current law classifying gig workers as independent contractors instead of employees. 

Match Group (MTCH) is up more than +6% after Barclays upgraded the stock to overweight from equal weight.

ZoomInfo Technologies (ZI) is up more than +2% after announcing a $100 million stock buyback program.

United Airlines Holdings (UAL) is down more than -4% to lead losers in the S&P 500 after it cut guidance for Q1 and now said it expected an adjusted loss per share in Q1 of -60 cents to -$1.00, much weaker than a previous estimate of a gain of 50 cents to $1.00.

Atlassian Group Plc (TEAM) is down more than -5% to lead losers in the Nasdaq 100 on the heels of a -30% plunge in peer Gitlab (GTLB) after the company forecasted 2024 revenue of $529 million-$533 million, well below the consensus of $587.3 million.

Alaska Air Group (ALK) is down more than -2% after cutting guidance on Q1 adjusted pretax margin to -6% to -4% from a prior estimate of -4% to -1%. 

Across the markets…

June 10-year T-notes (ZNM23) today are down -1-8/32 points, and the 10-year T-note yield is up +7.4 bp at 3.647%.  June 10-year T-notes this morning are moderately lower as an easing of contagion concerns from the U.S. banking crisis pushes stocks higher and curbs safe-haven demand for T-notes.  Also, higher German bund yields are weighing on T-note prices, with the 10-year German bund yield up +19.1 bp at 2.449%.

The dollar index (DXY00) today is up by +0.10%.  An easing of contagion risk from the U.S. banking crisis is pushing T-note yields higher and supporting moderate gains in the dollar.  The dollar’s upside is limited as today’s rally in stocks reduces the liquidity demand for the dollar.

EUR/USD (^EURUSD) today is down by -0.23%.  A rebound in the dollar today has sparked long liquidation in the euro.  Also, today’s economic news showed a steeper-than-expected decline in Italy's Jan industrial production that weighed on EUR/USD.

Italy Jan industrial production fell -0.7% m/m, weaker than expectations of -0.4% m/m.

USD/JPY (^USDJPY) today is up by +1.19%.  The yen today is under pressure from a sharp decline in Japanese government bond yields after the 10-year JGB bond yield fell to a 6-3/4 month low of 0.177%. Also, higher T-note yields today are weighing on the yen. 

April gold (GCJ3) this morning is down -9.7 (-0.51%), and May silver (SIK23) is down -0.158 (-0.72%).  Precious metals prices this morning are moderately lower as they give back some of Monday’s large gains.  A stronger dollar today is bearish for metals.  Also, an easing of contagion risk from the U.S. banking crisis is pushing bond yields higher today and is weighing on precious metal prices.  In addition, today’s as-expected U.S. Feb CPI report has reduced the demand for gold as an inflation hedge.

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