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Wall St equities gain, Treasury yields rise on lull in bank worries

2023-03-27T15:16:53Z

Wall Street equities gained and U.S. Treasury yields rose on Monday as investor concerns about the financial system were calmed after First Citizens BancShares (FCNCA.O) said it would take on the deposits and loans of failed Silicon Valley Bank (SIVB.O).

The deal offered a respite after weeks of turmoil prompted by the collapse of tech-focused Silicon Valley Bank and punctuated by more bank failures and rescues.

U.S. Treasury yields rose on optimism that stress in the banking sector could be contained and before the Treasury Department was due to sell short- and intermediate-dated debt.

The S&P 500 bank index (.SPXBK), after closing down more than 22% for the month-to-date on Friday, was up 2% on Monday.

In Europe, Deutsche Bank shares (DBKGn.DE) were up 5% after leading declines in the sector on Friday, when investors fled to the exits as they watched the cost of insuring the German bank’s debt against the risk of default jump.

While the First Citizens deal helped sentiment on Monday, it did not completely dispel concerns about the banking sector’s health and the impact of higher interest rates on the global economy.

“We’re really flying blind in terms of trying to get a sense of how much more contagion there’s going to be in the banking system – step one, and then step two, whether that’s going to have broad economic fallout, and step three, how big is the fallout,” said Thomas Simons, money market economist at Jefferies in New York.

As a result, Simons said market trading is very skittish and emotional while investors try to process available information that he described as “so incomplete” that it is resulting in “starkly different views” at any given time.

The Dow Jones Industrial Average (.DJI) rose 131.09 points, or 0.41%, to 32,368.62, the S&P 500 (.SPX) gained 9.47 points, or 0.24%, to 3,980.46 and the Nasdaq Composite (.IXIC) added 1.11 points, or 0.01%, to 11,825.07.

The pan-European STOXX 600 index (.STOXX) rose 1.08% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.28%.

In U.S. Treasuries, benchmark 10-year note yields were up 10.1 basis points to 3.479%, from 3.378% late on Friday. The 30-year bond was last up 5.6 basis points to yield 3.7004%, from 3.644%, and 2-year note yields were last was up 15.7 basis points at 3.9339%.

The dollar rose to a two-day high against the Japanese yen but the U.S. currency traded in a narrow range against most major currencies as investors appeared hesitant to place big wagers as they sought clarity on the fallout from the recent collapse of two U.S. lenders and the rescue of Credit Suisse (CSGN.S).

Credit Suisse last week became the highest-profile casualty in the financial sector crisis, as Switzerland’s second-largest bank was rescued by rival UBS (UBSG.S).

In the United States, depositors have been fleeing smaller banks for larger institutions or to money market funds. Flows to such funds have risen by more than $300 billion in the past month to a record above $5.1 trillion, according to Bank of America, citing figures from EPFR data provider.

The dollar index was flat, with the euro up 0.16% to $1.0776.

The Japanese yen weakened 0.56% versus the greenback at 131.42 per dollar, while Sterling was last trading at $1.2271, up 0.34% on the day.

Oil prices rose after a halt to oil exports from Iraqi Kurdistan via Turkey and as investors reacted positively to efforts to contain a banking crisis that could potentially hurt the global economy and hit demand for crude.

U.S. crude recently rose 1.76% to $70.48 per barrel and Brent was at $76.10, up 1.48% on the day.

Gold prices slipped as a rebound in equities dented the metal’s safe-haven appeal. Spot gold dropped 1.1% to $1,954.70 an ounce. U.S. gold futures % to $1,982.10 an ounce.

Bitcoin was down 2.13% to $27,408.00.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 22, 2023. REUTERS/Brendan McDermid

A man is reflected on an electronic board displaying various companies’ stock prices outside a brokerage in Tokyo, Japan, February 22, 2022. REUTERS/Kim Kyung-Hoon/File Photo
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