Markets Today: Stocks Climb as Bank Confidence Improves

Morning Markets

March S&P 500 futures (ESM23) this morning are up +0.82%, and March Nasdaq 100 E-Mini futures (NQM23) are up +0.60%.

U.S. stock index futures this morning are moderately higher, led by a rally in regional bank stocks in pre-market trading.  First Republic Bank is up more than +20% following a proposal from JPMorgan Chase to boost capital into the bank.  Bank stocks are also climbing following a report from Blomberg that said U.S. officials are studying ways they might temporarily expand Federal Deposit Insurance coverage to all bank deposits. 

The FOMC begins its 2-day meeting today, and the federal funds futures market is discounting an 80% chance for the Fed to raise its federal funds target range by 25 bp to 4.75-5.00% from the current 4.50-4.75%.  However, stocks are also climbing on speculation the Fed may adopt a more cautious approach to tightening monetary policy and could slow or pause its pace of quantitative tightening to keep ample liquidity in the financial system.

A Bloomberg report said U.S officials are studying ways they might temporarily expand Federal Deposit Insurance coverage to cover all deposits greater than the $250,000 cap on most accounts after the Mid-Size Bank Coalition of America, which includes banks with assets as much as $100 billion, expressed concern that, if another regional lender fails, more depositors will move their money to the nation's largest banks, regardless of the underlying health of their smaller competitors.

Global bond yields are climbing this morning as banking turmoil eases and stocks rally.  The 10-year T-note yield today is up +8.1 bp at 3.566%, the 10-year German bund is up +14.5 bp at 2.270%, and the 10-year UK gilt yield is up +6.6 bp at 3.376%. 

Overseas stock markets are higher.  The Euro Stoxx 50 today is up +1.79%.  China’s Shanghai Composite stock index closed up +0.64%, and Hong Kong’s Hang Seng Index closed up +1.36%.  Japan was closed today for the Vernal Equinox Day holiday. 

The Euro Stoxx 50 index today rallied to a 1-week high and is moderately higher.  Strength in bank stocks is lifting the overall market today as banking turmoil eased. UBS Group AG is up more than +3% today despite having its credit outlook lowered to negative from stable by S&P Global and Moody’s Investors Service.  Dip buyers are also buying bank stocks after the rout over the past week knocked valuations down to potentially attractive levels.  Automakers are also climbing today after economic news showed auto sales in Europe increased for a seventh straight month. 

European government bond yields are climbing today as easing the banking turmoil sparked a rally in stocks and reduced the safe-haven demand for government debt.  Also, hawkish comments today from ECB Governing Council member Kazaks helped push bond yields higher when he said, "it's not possible to say that the ECB has stopped raising interest rates at this point." As a result, the 10-year German bund yield is up +14.5 bp at 2.270%.

Eurozone economic news today was mixed for stocks.  On the positive side, Eurozone Feb new car registrations rose +11.5% y/y to 803,000 units.  Also, Eurozone Jan construction output rose +3.9% m/m, the largest increase in 1-3/4 years.  Conversely, the German Mar ZEW expectations of economic growth fell -15.1 to 13.0, weaker than expectations of 15.0.

China’s Shanghai Composite today closed moderately higher.  Strength in China’s financial and banking stocks led the overall market higher as concerns of an escalation of the U.S.-European banking turmoil eased. Market sentiment also improved on a Bloomberg report that said U.S. officials are studying ways to temporarily guarantee all bank deposits if the turmoil expands.  Video game makers also rallied today after China’s online gaming regulator approved 27 more games, a positive factor for the online gaming industry. In addition, stocks of Chinese defense firms rallied today after the national regulator said that its stepping up support to the domestic sector, enhancing economic quality and boosting research and innovation.

Pre-Market U.S. Stock Movers

First Republic Bank (FRC) is up more than +20% in pre-market trading on a JPMorgan Chase plan to convert some or all of the $30 billion deposit injection by a group of the largest U.S. banks into a capital infusion, which would substantially strengthen the bank’s balance sheet and financial health.  Other regional bank stocks are seeing support, with Western Alliance Bancorp (WAL), PacWest Bancorp (PACW), Huntington Bancshares (HBAN), and Regions Financial (RF) up +3% or more.

Meta Platforms (META) climbed more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight. 

Emerson Electric (EMR) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight. 

New York Community Bancorp (NYCB) rallied more than +6% in pre-market trading after D.A. Davidson upgraded the stock to buy from neutral.

Harmonic (HLIT) jumped more than +6% in pre-market trading after Charter Communications selected the company as a strategic technology partner to deploy virtual CMTS technology for next-generation broadband services.

Harley-Davidson (HOG) climbed more than +3% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight. 

Charles Schwab (SCHW) rose more than +2% in pre-market trading on signs of insider buying after an SEC filing showed Bernard Clark, head of Schwab’s advisor services, bought $274,154 of his company’s stock last Friday.

PDD Holdings (PDD) lost more than -1% in pre-market trading after Google suspended the company’s app on the Play Store for security concerns. 

Adobe (ADBE) slid nearly -1% in pre-market trading after Phillip Securities downgraded the stock to accumulate from buy.

First Industrial Realty Trust (FR) fell more than -1% in pre-market trading after Goldman Sachs downgraded the stock to sell from suspended coverage.

GoDaddy (GDDY) slid more than -1% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight.

Today’s U.S. Earnings Reports (3/21/2023)

AAR Corp (AIR), Array Technologies Inc (ARRY), Battalion Oil Corp (BATL), Citi Trends Inc (CTRN), Enerpac Tool Group Corp (EPAC), GameStop Corp (GME), HealthEquity Inc (HQY), Instil Bio Inc (TIL), NIKE Inc (NKE), ProFrac Holding Corp (ACDC), Terran Orbital Corp (LLAP).

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