- March 27, 2023
- By: Admin1_blog
- US Market
Stock futures edged higher Tuesday as Wall Street came off a winning week and investors continued to follow the latest from the bank sector.
First Citizens Bank agreed to buy large parts of Silicon Valley Bank, the U.S. Federal Deposit Insurance Corporation said overnight. The deal includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC.”
Futures tied to the Dow Jones Industrial Averages added 121 points, or 0.37%. S&P 500 futures gained 0.29%, while Nasdaq-100 futures were flat.
The moves come after Wall Street capped off a wining streak despite volatility related to the Federal Reserve’s latest interest rate hike and the ongoing bank crisis. The Nasdaq Composite led the major indexes upward with a 1.7% advance. The S&P 500 finished the week up 1.4%, while the Dow added 1.2%.
The central bank announced a quarter percentage point interest rate hike— which was largely in line with Wall Street expectations — while hinting that an end to interest rate increases could be on the horizon.
The health of the U.S. banking system also weighed on investors over the course of the week, with a particular focus on First Republic, PacWest and other regional financial institutions. CNBC reported over the weekend that the deposit outflow from small banks to industry giants like JPMorgan Chase and Wells Fargo has slowed in recent days.
Meanwhile, Bloomberg reported that U.S. authorities were considering expanding an emergency lending program fo banks, which could give First Republic more time to shore up its liquidity. First Republic ended last week down 46.3% as investors contemplated if the plan from a group of banks to deposit $30 billion would be enough to bolster its balance sheet.
Fed Chair Jerome Powell and Treasury Secretary Janet Yellen aimed to assure investors that the U.S. Banking system remained stable and supported in commentary delivered over the course of the week. That helped ease investors’ fears, in turn allowing the SPDR S&P Regional Banking ETF (KRE) and broader SPDR S&P Bank ETFto finish the week 0.2% and 0.4% higher, respectively, after selloffs in the preceding weeks. But both ETFs are still down more than 25% since March began.
In addition to First Republic, investors sold off U.S.-listed shares of Deutsche Bank after the German lender’s credit default swaps shot up, leaving the stock down 5.5% for the week. The news reignited concerns over the health of the European banking system that started with UBS’ acquisition of Credit Suisse earlier this month.
“All told, this was about as dovish a rate increase as you can get. On the whole, that seemed to leave markets feeling if not good, then at least not bad,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Although markets were okay with the Fed, it was the second thing — the ongoing turmoil in the banking system — that mattered even more.”
In the week ahead, investors will likely continue watching the banking sector for indicators of potential weakness. They will also watch Monday for the Dallas Fed meeting survey and post-bell commentary on monetary policy from Fed Gov. Philip Jefferson.