Stock futures rise as SVB collapse reverberates through global markets; February inflation report in focus as Fed rate bets unravel; First Republic recovers as regional banks struggle to insure fleeing depositors; The feds will auction off SVB’s assets as a new team takes over the failing bank and Boeing nears a $37 billion Dreamliner sale to Saudi Arabia.
Five things to know before the market opens on Tuesday, March 14:
1. — Stock futures rise as SVB collapse reverberates through global markets
US stock futures rose modestly on Tuesday as Treasury yields flattened and the dollar extended its decline in currency markets as investors continued to worry that the Silicon Valley Bank collapse would spread across the US. global markets, particularly in the financial sector, and possibly induce a short-term recession in the world’s largest economy.
financial SVB (BLIMS) – Get a free reportFriday night’s collapse triggered a coordinated effort by the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation to protect bank deposits and shore up concerns for the safety of regional lenders across the country. .
Bank stocks took a hit again yesterday, however, as fears of contagion from the SVB failure swept markets around the world, slashing more than $90 billion in value from the largest US bank stocks. USA in a single session.
The benchmark The KBW Bank Index, in fact, fell 12% yesterday, its biggest single-day drop since summer 2020.
Investors were also busy pricing interest rate markets amid speculation that the Federal Reserve, which now offers one-year loans to national banks in exchange for Treasury securities, agencies and high-risk mortgages, quality, it could be forced to pause or even give up its fight against inflation to prevent the simmering crisis from turning into a full-scale bank run.
Benchmark 2-year notes rallied on Tuesday, with yields falling the most in a single session since 2008, briefly trading below the 4% level before recovering to around 4.24% in overnight trading. Asia. The benchmark 10-year notes were set at 3.617%.
Meanwhile, CME Group’s FedWatch is pricing in a 16.6% chance that the Federal Reserve will make no change to its benchmark interest rate at next week’s policy meeting in Washington, with chances that a rate already in July it increases to around 58%. .
At the same time, market volatility indicators have soared, with the CBOE Group VIX Index topping the market’s 30 points yesterday and trading around 26.6 in the overnight session, suggesting that traders They see daily swings in the S&P 500 of around 64 points. or 1.66%, in the short term.
Heading into trading on Wall Street, futures contracts linked to the S&P 500, which fell into negative territory for the year at the low point of yesterday’s session, signaled a modest opening bell gain of 10 points, while those linked to The Dow Jones Industrial Average were looking for an 85-point rise. The rate-sensitive Nasdaq is looking for a 26-point gain.
In foreign markets, Europe’s Stoxx 600 rose 0.2% in early trading in Frankfurt, while Britain’s FTSE 100 fell 0.32% in London.
In Asia last night, the MSCI ex-Japan index of the entire region was down 1.72% at close of trading, while heavy losses at Japanese banks sent the Nikkei 225 down 2.19% in Tokyo. .
2. — February inflation report in focus as Fed rate bets unravel
The Commerce Department will release what is now a crucial report on February inflation on Tuesday, as the Federal Reserve grapples with the twin challenges of stemming the contagion unleashed by the SVB collapse while continuing to stifle price pressures in the broader economy. biggest in the world.
The February CPI report, expected at 8:30 am ET, highlights a relatively slow week for data releases and corporate earnings now that the fourth-quarter reporting season is largely complete, and Markets are now moving cautiously towards the Fed’s March rate decision.
Economists expect the February CPI report, scheduled for release at 8:30 a.m. ET, to show a modest decline from the headline year-over-year reading, to around 6%, with a core inflation count that 0.1% lower is closely followed. at 5.5%. On a monthly basis, core inflation will likely rise 0.4%, with a similar gain for the headline reading.
“Inflation progress would give the Fed a set point at which to pause, but CPI and PPI data have been of little use recently,” said Ian Shepherdson of Pantheon Macroeconomics. “Sooner or later the CPI measure will clearly and rapidly break down, but we have no way of knowing when this will happen.”
3. — The First Republic recovers as regional banks fight to ensure the flight of depositors
Shares of regional banks rallied strongly in premarket trading on Tuesday, a welcome move for investors concerned that deposit flight from smaller banks will accelerate in the coming days following the collapse of SVB Financial on Friday and the Signature Bank of New York acquisition on Sunday night.
First Republic Bank, a San Francisco-based lender and wealth manager with a list of blue-chip clients, lost more than $9 billion in market value yesterday as investors dumped shares in regional banks amid of concerns that depositors would withdraw their cash to place it in the largest US banks and institutions amid the still resonant turmoil created by the spectacular fall of SVB.
Indeed, London’s Financial Times reported that big US banks such as JPMorgan Chase, Citigroup and Bank of America were experiencing a massive inflow of new funds, even after President Joe Biden delivered a nationally televised speech to ensure the confidence in the country’s banking system after the Treasury moved to guarantee SVB deposits and the Fed offered its new lending support to support banks’ balance sheets.
“Americans can trust that the banking system is secure,” President Biden said. “Your deposits will be there when you need them.”
Shares of First Republic Bank FRC were marked up 20% in premarket trading to indicate an opening price of $37.39 each. PacWest shares rose 33.75% to $13.01 apiece, while Western Alliance Bancorporation rose 17.3% to $30.65 apiece.
4. — The feds will auction off SVB’s assets while a new team takes over the failing bank
US regulators are expected to make another attempt to auction off the assets of failed lender SVB Financial on Tuesday, according to a Wall Street Journal report, after failing to find a buyer following its collapse over the weekend.
The Journal said the Federal Deposit Insurance Corporation has informed Senate Republican lawmakers that given SVB’s potential threat to the US financial system, the FDIC will have more time and more flexibility to find a buyer for the technology-focused lender.
SVB itself appointed William Kosturos as its new head of restructuring, a position he held after the collapse of Washington Mutual in 2008, and plans to explore “strategic alternatives”, including the sale of separate divisions SVB Capital and SVB Securities, following their acquisition. by California regulators on Friday.
New CEO Tim Mayopoulos, a former Fannie Mae executive who was appointed to the role on Sunday, said he looks forward to doing business as usual, telling staff in a letter Monday that he “looks forward to meeting the customers of Silicon Valley Bank … I also came to this position with experience in these kinds of situations.”
5. — Boeing closes in on $37 billion Dreamliner sale to Saudi Arabia
Boeing BA shares rose in premarket trading after reports that the planemaker is close to completing a deal to sell nearly 80 of its 787 Dreamliners to Saudi Arabia.
Reuters, as well as the Wall Street Journal, said the deal could be announced today and could be worth around $37 billion at current list prices. The sale itself is expected to comprise 78,787 Dreamliners, split between state-owned Saudi Arabian Airlines and Riyadh Air, with an option to buy a further 43 jumbo jets.
Last month, Boeing signed a $34 billion aircraft contract with Air India under which the region’s largest airline would buy at least 20 787-9 Dreamliners, with options for 20 more, in what the president Joe Biden described it as a “historic deal” that would support more than a million American jobs in 44 states.
Boeing shares rose 0.3% in premarket trading to indicate an opening bell price of $204.00 each.