Stocks Settle Mixed with Bank Stocks Higher and Tech Stocks Lower

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.60%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.74%.

Stock indexes Monday settled mixed.  The broader market posted moderate gains on strength in bank stocks as the prospect of additional support from U.S. authorities eased some concerns about liquidity at regional banks.  However, higher bond yields on Monday weighed on technology stocks and kept the Nasdaq 100 in negative territory.

First Republic Bank closed up more than +11% Monday to lead bank stocks higher after a Bloomberg report said U.S. authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet.  Also, First Citizens BancShares surged more than +50% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after the regulatory seizure.

Fed Vice Chair for Supervision Michael Barr said regulators "will continue to closely monitor conditions in the banking system and are prepared to use all of our tools for any size institution, as needed, to keep the system safe and sound."

Moody's said in a research report that weekly data collected by the Federal Reserve showed deposits in small U.S. banks fell -$109 billion, or -1.5% y/y in the week through March 15, the first annual decline since 1986.

Morgan Stanley warns that corporate earnings estimates and valuations need to come down as "given the events of the past few weeks, we think guidance is looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes."

Monday’s U.S. economic news was negative for stocks after the March Dallas Fed manufacturing outlook level of general business activity index unexpectedly fell -2.2 to -15.7, weaker than expectations of an increase to -10.0.

On Sunday, Minneapolis Fed President Kashkari said recent bank turmoil had increased the risk of a U.S. recession but that it was too soon to judge what it means for the economy and monetary policy.

Global bond yields rose Monday on easing bank concerns.  The 10-year T-note yield rose +14.6 bp to 3.522%. Also, the 10-year German bund yield rose +9.9 bp to 2.227%, and the 10-year UK gilt yield rose +8.3 bp to 3.366%. 

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.82%.  China’s Shanghai Composite stock index closed down -0.44%, and Japan’s Nikkei Stock Index closed up +0.33%. 

Today’s stock movers…

Bank stocks rallied Monday following a Bloomberg report that said U.S. authorities are considering an expansion of an emergency lending facility for banks in a way that would give First Republic Bank more time to shore up its balance sheet. As a result, First Republic Bank (FRC) closed up more than +11% to lead gainers in the S&P 500.  Comerica (CMA) closed up more than +5%, and Bank of America (BAC) closed up more than +4%. Wells Fargo (WFC), Fifth Third Bancorp (FITB), Zions Bancorp (ZION), and Citigroup (C), Huntington Bancshares (HBAN) closed up more than +3%. 

First Citizens Bancshares (FCNCA) closed up more than +50% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after regulators seized it.

International Flavors & Fragrances (IFF) closed up more than +6% after the company reaffirmed its guidance that Q1 sales would be about $2.95-$3.00 billion. 

IBM (IBM) closed up more than +3% to lead gainers in the Dow Jones Industrials after Bloomberg Intelligence said it expects the company’s margins will expand by roughly 100 bps in the second half of the year on tighter cost controls.

Energy stocks and energy service providers rallied Monday after the price of WTI crude surged more than +5% to a 1-1/2 week high. Schlumberger (SLB) closed up more than +4%. Marathon Petroleum (MPC), Haliburton (HAL), Hess Corp (HES), Devon Energy (DVN), and Marathon Oil (MRO) closed up more than +3%. Phillips 66 (PSX), Occidental Petroleum (OXY), and Exxon Mobil (XOM) closed up more than +2%. Diamondback Energy (FANG) closed up more than +2% to lead gainers in the Nasdaq 100. 

Signify Health (SGFY) closed up more than +5% after CVS Health agreed to purchase the company for about $8 billion or $30.50 per share. 

KeyCorp (KEY) is up more than +5% after Citigroup upgraded the stock to buy from neutral.

Roku (ROKU) closed up more than +4% after Susquehanna Financial upgraded the stock to positive from neutral, saying the company’s long-term drivers remain intact and the valuation reset creates an “attractive risk/reward.” 

Carnival (CCL) closed down more than -4% to lead losers in the S&P 500 after it forecasted full-year capex of $3.2 billion, below the consensus of $3.5 billion. 

Technology stocks fell back Monday after the 10-year T-note yield jumped more than +14 bp to 3.522%.  Alphabet (GOOGL) and Microchip Technology (MCHP) closed down more than -2%. Also, Apple (APPL), Microsoft (MSFT), Meta Platforms (META), Broadcom (AVGO), and Advanced Micro Devices (AMD) closed down more than -1%.

U.S.-listed Chinese stocks moved lower after Baidu postponed a media briefing scheduled for today related to its AI chatbot.  PDD Holdings (PDD) closed down more than -3% to lead losers in the Nasdaq 100.  Baidu (BIDU) closed down by more than -2%. JD.com (JD) and NetEase (NTES) closed down more than -1%.

Frontier Communications (FYBR) closed down more than -8% after Morgan Stanley downgraded the stock to underweight from equal weight.

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed down -1-4/32 points and the 10-year T-note yield rose by +14.6 bp to 3.522%.  June T-notes retreated Monday on long liquidation pressures as fears of banking-sector contagion eased amid reports of additional support from U.S. authorities.

Also, supply pressures weighed on T-note prices as the Treasury will auction $142 billion of T-notes and floating-rate notes this week.  T-notes extended their losses Monday afternoon on weak demand for the Treasury’s $42 billion auction of 2-year T-notes with a bid-to-cover ratio of 2.44, well below the 10-auction average of 2.62 and the lowest in 16 months.

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