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Wall St set for higher open as SVB deal soothes frayed nerves

2023-03-27T12:40:15Z

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

Wall Street’s main indexes were set to open higher on Monday after a buyout deal for the deposits and loans of the failed Silicon Valley Bank calmed nerves about stress in the banking sector.

First Citizens BancShares Inc (FCNCA.O) said on Monday it will acquire parts of Silicon Valley Bank (SIVB.O), which collapsed earlier this month in the largest bank failure since the 2008 financial crisis, unleashing fears about a liquidity crunch in the sector.

Shares of First Citizens jumped 40% in premarket trade, while First Republic Bank (FRC.N) surged 25.7% after a report said U.S. authorities were considering more support for banks, which could give the embattled regional lender more time to shore up its balance sheet.

Regional banks Western Alliance Bancorp (WAL.N) and PacWest Bancorp (PACW.O) also climbed 5.9% and 9.8%, respectively.

Shares of major U.S. banks JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) advanced between 1.5% and 2.1%.

European bank shares also rebounded from declines last week when a sharp jump in Deutsche Bank’s credit default swaps, a type of insurance for bondholders, had exacerbated worries about the health of banks in the region.

“SVB was a victim of growing too fast and unwisely investing too much of its deposit base in longer-dated treasuries. The takeover has provided some reassurance that beneath this huge mistake, SVB was basically sound,” said Stuart Cole, head macro economist at Equiti Capital.

The absence of any new banking failures over the weekend has also helped sentiment, Cole added.

U.S. Treasury yields rose on Monday as fears about the banking sector eased, with the yield on the two-year note last at 3.9%.

Traders have largely priced in that the Federal Reserve will pause rate hikes in May amid lingering worries about the banking sector stress potentially causing a steep economic downturn.

Still, despite the turbulence in financial markets, in the past two weeks the benchmark S&P 500 (.SPX) and the tech-heavy Nasdaq (.IXIC) logged their biggest two-week gain since early February and are on course for a quarterly gain.

Investors are also awaiting a host of economic data this week, including a consumer confidence reading and an inflation report that could give more clues about the Fed’s monetary policy path.

Remarks by Fed Board Governor Philip Jefferson, a voting member of the Federal Open Market Committee (FOMC) this year, on monetary policy later in the day will also be on the radar.

At 8:20 a.m. ET, Dow e-minis were up 203 points, or 0.63%, S&P 500 e-minis were up 25 points, or 0.62%, and Nasdaq 100 e-minis were up 43.25 points, or 0.34%.

Among other stocks, shares of Tesla Inc (TSLA.O) edged 1.7% higher after Barclays said it expects the electric carmaker’s first-quarter deliveries to beat estimates.

U.S.-listed shares of AstraZeneca Plc gained 1.6% premarket after the drugmaker’s Eplontersen drug showed positive results in a late-stage trial.

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