Stocks Rally as Bank Jitters Subside

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +1.68%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.32%.

Stock indexes Tuesday posted moderate gains on hopes that the worst of the U.S. banking turmoil has passed.  Bank stocks moved higher Tuesday on optimism that actions taken by government agencies to support the banking system will prevent broader contagion.  Tuesday’s U.S. consumer price report was close to expectations and was also positive for stocks.  However, stock indexes fell back from their best levels on geopolitical concerns after a Russian fighter jet collided with a U.S. drone over the Black Sea.

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 also supported gains in stocks.  Charles Schwab closed up more than +9% on signs of insider buying after CEO Bettinger told CNBC that he bought 50,000 shares of his company’s stock for his own account.  Also, Meta Platforms closed up more than +7% after announcing about 10,000 job cuts and closing around 5,000 additional open positions.  In addition, Bunge closed up more than +15% 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.

On the negative side, United Airlines Holdings closed down more than -5% after it cut guidance for Q1 and now said it expected an adjusted loss per share in Q1.  Also, commercial real estate stocks tumbled Tuesday after Ritholtz Wealth Management said, “commercial real estate is the next shoe to drop, specifically office building real estate."  As a result, Vornado Realty closed down more than -5%, and Boston Properties and Hudson Pacific Properties closed down more than -4%.

Bitcoin (^BTCUSD) rose more than +1% Tuesday and posted 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.

Tuesday’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 Tuesday rose +4.6 bp at 3.619%. Also, the 10-year German bund yield rose +16.0 bp at 2.420%, and the 10-year UK gilt yield climbed +11.8 bp to 3.488%.  Fed fund futures have priced in a 25 bp rate hike at next week’s FOMC meeting.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 today closed up +2.02%.  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) closed up more than +26% to lead gainers in the S&P 500 as it recovers some of its sharp losses over the last three sessions. 

Charles Schwab (SCHW) closed up more than +9% on signs of insider buying after CEO Bettinger told CNBC that he bought 50,000 shares of his company’s stock for his own account. 

Bank stocks rallied Tuesday as the sector stabilized after the selloff seen in the sector over the past two sessions.  Citigroup (C) and KeyCorp (KEY) closed up more than +5%, and Northern Trust (NTRS) and Wells Fargo (WFC) closed up more than +4%.  Also, Citizens Financial Group (CFG), Synchrony Financial (SYF), and Bank of New York Mellon (BK) closed up more than +3%. 

Meta Platforms (META) closed up more than +7% to lead gainers in the Nasdaq 100 after announcing about 10,000 job cuts and closing around 5,000 additional open positions.

Bunge (BG) closed up more than +15% 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.

Crowdstrike Holdings (CRWD) closed up more than +5% after Morgan Stanley raised its price target on the stock to $163 from $150.

Match Group (MTCH) closed up more than +5% after Barclays upgraded the stock to overweight from equal weight.

United Airlines Holdings (UAL) closed down more than -5% 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.

Gitlab (GTLB) closed down more than -23% after the company forecasted 2024 revenue of $529 million-$533 million, well below the consensus of $587.3 million.

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

Commercial real estate stocks tumbled Tuesday after Ritholtz Wealth Management said, “commercial real estate is the next shoe to drop, specifically office building real estate. There is much trouble coming to this sector.”  As a result, Vornado Realty (VNO) closed down more than -5%.  Also, Boston Properties (BXP) and Hudson Pacific Properties (HPP) closed down more than -4%.  In addition, SL Green Realty (SLG) closed down more than -3%.  

Across the markets…

June 10-year T-notes (ZNM23) on Tuesday closed down -25.5 ticks, and the 10-year T-note yield rose by +4.6 bp to 3.619%.  June 10-year T-notes Tuesday posted moderate losses as an easing of contagion concerns from the U.S. banking crisis pushed stocks higher and curbed safe-haven demand for T-notes.  Also, higher German bund yields weighed on T-note prices as the 10-year German bund yield rose +16.0 bp to 2.420%.

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