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Futures mixed as banking crisis worries persist

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 16, 2023. REUTERS/Brendan McDermid

U.S. stock index futures were mixed on Friday as investors remained wary about a potential banking crisis despite the country’s largest banks throwing troubled regional lender First Republic Bank a lifeline.

Big banks including JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N) threw a $30 billion lifeline to First Republic (FRC.N) on Thursday, calming some nerves and helping Wall Street’s main indexes notch gains, with the tech-heavy Nasdaq (.IXIC) rallying over 2%.

At 7:05 a.m. ET, Dow e-minis were down 96 points, or 0.3%, S&P 500 e-minis were down 4.25 points, or 0.11%, and Nasdaq 100 e-minis were up 12.5 points, or 0.1%.

However, First Republic’s shares fell 12.1% in premarket trading after the bank suspended its dividend payout.

The lender’s shares have taken a beating this week, slumping 58%, after the recent collapse of SVB Financial (SIVB.O) and Signature Bank (SBNY.O) unleashed fears of a broader banking crisis stemming from surging interest rates.

Peer PacWest Bancorp (PACW.O) fell 5.2% before the bell, while Western Alliance (WAL.N) edged 1.7% lower. Big U.S. banks were mixed, with JPMorgan and Citigroup (C.N) flat, while Wells Fargo (WFC.N) edged 0.1% higher.

“We’re not out of the woods yet by any means. The rally we saw in equities yesterday was more of a relief rather than any suggestion that we’ve turned a corner in any material sense,” said Stuart Cole, head macro economist at Equiti Capital.

The news of the rescue came on the heels of a 50-basis-point rate hike by the European Central Bank (ECB), which remains laser-focussed on taming inflation despite concerns about the region’s banks after troubles emerged at Credit Suisse .

European Central Bank supervisors saw no contagion to euro zone banks from the recent market turmoil, a source said.

Investors are now looking ahead to the Federal Reserve’s interest rate decision, due next week, to gauge how it will tame inflation amid a banking crisis.

Despite a roller-coaster week, the Nasdaq (.IXIC) appears set to log its biggest weekly percentage gain since November depending on the day’s moves as a drop in U.S. Treasury yields supported some Big Tech and growth stocks.

Treasury yields fell on Friday, with the yield on the two-year note, which best reflects rate expectations, at 4.12%.

Money market participants now see an 83% chance of the Fed raising rates by 25 basis points on March 22.

“But thereafter, the market is kind of getting more bullish now that could be the end, or at least a pause, in the Fed’s tightening,” Cole said.

Investors will monitor on February industrial production data and the University of Michigan’s consumer sentiment survey for March to assess the strength of the U.S. economy.

Shares of FedEx Corp (FDX.N) rose 11.6% premarket after the delivery giant raised its full-year earnings forecast, helped by cost cuts.

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