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S&P, Nasdaq futures rise as rate jitters ease; bank contagion fears linger

2023-03-13T11:57:35Z

A Trader works inside a post on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 7, 2023. REUTERS/Brendan McDermid

S&P 500 and Nasdaq futures rose on Monday amid increased expectations of a pause in interest rate hikes in March, though gains were capped as bank stocks declined following Silicon Valley Bank’s (SVB) collapse.

Helping futures for the tech-heavy Nasdaq gain nearly 1%, U.S. two-year Treasury yields tumbled to more than a month low, while futures for the cyclicals-heavy Dow Jones edged lower.

Big Tech and growth companies such as Meta Platforms (META.O), Amazon (AMZN.O) and Microsoft (MSFT.O) rose between 1% and 2% premarket.

The sudden shutdown of SVB Financial (SIVB.O) on Friday after a failed capital raise triggered concerns about risks to other banks from the Federal Reserve’s sharpest rate hike cycle since the early 1980s.

Regulators over the weekend stepped in to restore investor confidence in the banking system, saying Silicon Valley Bank depositors will have access to their funds on Monday.

“I think the authorities moved rapidly to shore up confidence and that was the right thing to do,” said Art Hogan, chief market strategist at B. Riley Wealth.

“With that as a backdrop and in a market that was pretty jittery coming up its worst week of the year, certainly the potential for us to bounce a bit especially in the sectors outside of financials is there.”

Trading in shares of SVB’s peer Signature Bank (SBNY.O), which was shut down by regulators on Sunday, was halted before the bell.

First Republic Bank (FRC.N) dropped 59.6% in premarket trading as news of fresh financing failed to reassure investors, while Western Alliance Bancorp (WAL.N) fell 46.6%.

Shares of big U.S. banks including JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Bank of America (BAC.N) fell between 0.8% to 4%

The S&P 500 bank sectors (.SPXBK) recorded its biggest weekly percentage fall since March 2020 on Friday.

The benchmark S&P 500 (.SPX) logged its worst week since September, falling 4.6% and erasing nearly all of its year-to-date gains as news of SVB’s collapse further hit investor sentiment already dented by hawkish comments from Fed Chair Jerome Powell.

Traders’ bets are currently equally split between a pause and a 25-basis-point rate hike at the Fed’s next meeting in March.

The projections of a terminal rate have also receded to just under 5% by June from around 5.5% in September earlier.

Goldman Sachs analysts said they no longer expect the Fed to raise rates by 25 basis points at its next policy meeting on March 21-22.

Investors also await crucial inflation data due on Tuesday for more clues on the Fed’s monetary tightening plans.

At 7:27 a.m. ET, Dow e-minis were down 48 points, or 0.15%, S&P 500 e-minis were up 5.5 points, or 0.14%, and Nasdaq 100 e-minis were up 99.25 points, or 0.84%.

Among individual stocks, Pfizer Inc (PFE.N) fell 2.2% after the drugmaker said it would buy Seagen Inc (SGEN.O) for nearly $43 billion.

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