S&P Futures Tick Higher as Bank Fears Ease, Focus Shifts to Fed Meeting

Oleksandr Pylypenko - Barchart - Tue Mar 21, 2023

June S&P 500 futures (ESM23) are trending up +0.40% this morning after three major U.S. benchmark indices endedthe regular session higher as the historic rescue deal for Credit Suisse helped strengthen sentiment on banking stocks, while investor attention shifted to the Federal Reserve’s two-day meeting.

In Monday’s trading session, the blue-chip Dow and the benchmark S&P 500 staged a relief rally as banking stocks rebounded after UBS Group AG (UBS) said it would acquire embattled lender Credit Suisse (CS) for 3 billion Swiss francs. Also, New York Community Bancorp Inc (NYCB) surged over +31% after its subsidiary, Flagstar Bank, agreed to buy deposits and loans from Signature Bank. However, First Republic Bank (FRC) cratered over -47% after S&P downgraded the bank for the second time in less than a week, citing “substantial long-term challenges.” At the same time, the Nasdaq underperformed as a rebound in U.S. Treasury yields and an over -14% slide in PDD Holdings Inc (PDD) limited gains in the tech-heavy index.

“Central bankers clearly remain extremely proactive in an attempt to contain contagion risks. More broadly, we believe this is another example of a central bank attempting to both tighten and loosen financial conditions at the same time,” said Chris Senyek, an analyst at Wolfe Research.

The Federal Reserve kicks off its two-day meeting later in the day, with consensus firming in recent days around the expectation of a 25 basis points hike on Wednesday. Meanwhile, U.S. rate futures have priced in an 83.4% chance of a 25 basis point rate increase and a 16.6% chance of no hike at all. Still, markets remain uncertain over the path of monetary policy in the wake of turmoil in the banking sector.

On the economic front, investors will likely focus on the U.S. Existing Home Sales data in a couple of hours. Economists, on average, forecast that February Existing Home Sales will stand at 4.19M, compared to the previous value of 4.00M.

In the bond markets, United States 10-Year rates are at 3.522%, up +1.30%.

The Euro Stoxx 50 futures are up +1.08% this morning, with banking stocks leading the recovery as investors took some heart from the rescue of beleaguered bank Credit Suisse ahead of the start of the Federal Reserve policy-setting meeting. European Central Bank President Christine Lagarde also lifted sentiment on banking stocks on Monday, saying the central bank “stands ready to respond as necessary” to preserve stability in the Eurozone. In addition, ECB President said Monday the current financial market disorder “might have an impact on demand and might actually do part of the ECB’s work.” Focus is now squarely on the U.S. Federal Reserve interest rate decision on Wednesday. In corporate news, Rwe Ag (RWE.D.DX) rose over +2% after Germany’s largest utility pledged a higher dividend and more investments to expand its core renewables business.

Germany’s ZEW Current Conditions, Germany’s ZEW Economic Sentiment, and Eurozone’s ZEW Economic Sentiment data were released today.

The German March ZEW Current Conditions stood at -46.5, weaker than expectations of -44.3.

The German March ZEW Economic Sentiment came in at 13.0, weaker than expectations of 17.1.

Eurozone March ZEW Economic Sentiment has been reported at 10.0, weaker than expectations of 16.0.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.64%, while the Japanese market was closed for a holiday.

China’s Shanghai Composite today closed higher, tracking a rebound in global equities on relief from the rescue of Swiss lender Credit Suisse. However, investors’ cautious mood ahead of the Federal Reserve’s interest rate decision kept gains limited. Meanwhile, analysts noted the market might be able to sustain a positive momentum into the coming weeks as Chinese shares may appear more attractive given the country’s reopening recovery momentum and increasing overseas risk after SVB and Credit Suisse shocks.

Pre-Market U.S. Stock Movers

First Republic Bank (FRC) rose about +21% in pre-market trading after the Wall Street Journal reported that JPMorgan Chase chairman and CEO Jamie Dimon was in talks with chief executives of other big banks to stabilize FRC.

Harmonic Inc (HLIT) climbed over +8% in pre-market trading after announcing a partnership with Charter Communications to deploy virtual CMTS technology for next-gen broadband services.

First Majestic Silver Corp (AG) plunged more than -17% in pre-market trading after the company said it temporarily suspended all mining activities and cut its workforce at the Jerritt Canyon gold mine to reduce overall costs.

Meta Platforms Inc (META) rose over +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

Intellia Therapeutics Inc (NTLA) surged about +5% in pre-market trading after Bernstein initiated coverage on the stock with an outperform rating.

TotalEnergies SE ADR (TTE) gained more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - March 21st

Nike (NKE), RWE AG PK (RWEOY), Tencent Music Entertainment Group (TME), JBS SA (JBSAY), GameStop Corp (GME), Healthequity Inc (HQY), Array (ARRY), Canadian Solar Inc (CSIQ), AAR (AIR), Enerpac Tool Group (EPAC), HUYA (HUYA), LumiraDx (LMDX), Terran Orbital (LLAP), Bitfarms (BITF), Tela Bio (TELA), So-Young (SY), Paysign (PAYS), Citi Trends (CTRN), Oxford Square (OXSQ), Semler Scientifc (SMLR), Cue Biopharma (CUE), X4 Pharmaceuticals (XFOR).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.