U.S. equity indexes rally: Nasdaq out front up >2%
All S&P 500 sectors green: financials lead
Euro STOXX 600 index up ~1.6%
Dollar edges up; gold dips; crude down >1%; bitcoin up ~7%
U.S. 10-Year Treasury yield jumps to ~3.66%
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BANKS: COULD THE WATER BE SAFE (ISH) AGAIN? (1032 EDT/1432 GMT)
After taking a severe beating on Monday and last week, shares in U.S. banks are regaining some lost ground on Tuesday on hopes that moves by the government to restore confidence in banks would succeed in averting a bigger financial crisis.
The collapse of three U.S. banks between Wednesday and Sunday sent bank investors fleeing on Monday with memories of the 2008/2009 great financial crisis returning with a vengeance.
On Sunday, the U.S. government offered a new loan program for banks and said it would make sure customers of the failed banks would have access to their deposits as it looked to stem a broader fallout from the sudden collapse of startup-focused lender Silicon Valley Bank, owned by SVB Financial and Signature Bank which was taken over by authorities on Sunday. Crypto lender Silvergate said Wednesday that it would have to wind down its operations.
After Monday brought the S&P 500 Banks index its biggest one-day sell-off since 2020 with an almost 7% drop, the index is up ~3% on Tuesday. Of course this only erased a small portion of the deep losses the sector incurred in the previous six-day losing streak, but under the hood are some big moves in the regional bank stocks that had been hit hardest.
First Republic shares are up ~48% on Tuesday after losing ~75% of their value in the previous six sessions. The bank last traded close to $49, down from $123.22 on March 3, before the sell-off began. Keycorp is up ~14% on Tuesday, while Zion Bancorp is up ~15%.
Investors had also reacted to the banking crisis with bets that it would lead the Federal Reserve to slow or stall its rate hiking cycle aimed at taming inflation.
In a way, Angelo Kourkafas, investment strategist at Edward Jones, said the crisis may help the broader market as it is "doing some of the Fed's work for the Fed."
"Financial conditions have tightened. Banks are likely to be more conservative and tighten lending conditions and that could cool economic activity and inflation," said Kourkafas. "That's why the Fed might be more comfortable pausing earlier than it would have without the bank rout we've had."
Here is a snapshot of S&P 500 banks from 1032 EDT:
U.S. STOCK FUTURES GREEN ON ROUGHLY IN-LINE CPI (0900 EDT/1300 GMT)
U.S. equity index futures are in positive territory in the wake of the release of the latest data on U.S. inflation.
The February CPI on a month-over-month and year-over-year basis came in flat with estimates. The month-over-month core reading was slightly above the estimate, while the year-over-year reading was in-line with the estimate:
According to the CME's FedWatch Tool, the probability of a 25 basis point rate hike at the March 21-22 FOMC meeting is now 92% from 78% just before the numbers were released. There is now around a 8% chance that the FOMC will leave rates unchanged from around 22% prior to the data coming out.
CME e-mini S&P 500 futures are gaining around 1.1%. The futures were up around 0.9% just before the numbers came out.
All S&P 500 sector SPDR ETFs are higher in premarket trade. Financials are showing the biggest gain, up about 4%.
A check of premarket action in banking ETFs shows the SPDR S&P Bank ETF gaining more than 7%, while the SPDR S&P Regional Banking ETF is up 10%.
Regarding the inflation data, Angelo Kourkafas, investment strategist at Edward Jones, said, "Today's report suggests that the Fed has more work to do. It's not dissimilar to January's report. We continue to see inflation slow down but not at the pace we were hoping to see."
Here is a premarket snapshot just shortly after 0900 EDT:
(Terence Gabriel, Sinéad Carew)
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)