Stocks See Support as Banking Stocks Gain

Rich Asplund - Barchart - Mon Mar 27, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.26%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.13%.

U.S. stock indexes this morning are mixed. The broader market is mildly higher on strength in bank stocks as the prospect of additional support from U.S. authorities eased some concerns about liquidity at regional banks. However, higher bond yields today are weighing on technology stocks and are keeping the Nasdaq 100 in negative territory.

First Republic Bank is up more than +15% to lead bank stocks higher after a Bloomberg report said U.S. authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet. Also, First Citizens BancShares surged more than +40% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after the regulatory seizure.

Today’s U.S. economic news was negative for stocks after the Mar Dallas Fed manufacturing outlook level of general business activity index unexpectedly fell -2.2 to -15.7, weaker than expectations of an increase to -10.0.

On Sunday, Minneapolis Fed President Kashkari said recent bank turmoil had increased the risk of a U.S. recession but that it was too soon to judge what it means for the economy and monetary policy.

Global bond yields are climbing today on easing bank concerns. The 10-year T-note yield is up +10.1 bp at 3.477%. Also, the 10-year German bund yield is up +9.8 bp at 2.227%, and the 10-year UK gilt yield is up +8.9 bp at 3.372%.

Overseas stock markets are mixed. The Euro Stoxx 50 today is up +0.75%. China’s Shanghai Composite stock index closed down -0.44%, and Japan’s Nikkei Stock Index closed up +0.33%.

Today’s stock movers…

Bank stocks are rallying today banks following a Bloomberg report said U.S. authorities are considering an expansion of an emergency lending facility for banks in a way that would give First Republic Bank more time to shore up its balance sheet. As a result, First Republic Bank (FRC) is up more than +18% to lead gainers in the S&P 500. Also, Comerica (CMA) is up more than +7%, and Zions Bancorp (ZION) and Truist Financial (TFC) are up more than +4%. In addition, Bank of America (BAC), Fifth Third Bancorp (FITB), and Huntington Bancshares (HBAN) are up more than +3%.

First Citizens Bancshares (FCNCA) is up more than +44% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after regulators seized it.

Roku (ROKU) is up more than +8% after Susquehanna Financial upgraded the stock to positive from neutral, saying the company’s long-term drivers remain intact and the valuation reset creates an “attractive risk/reward.”

Signify Health (SGFY) is up more than +5% after CVS Health agreed to purchase the company for about $8 billion or $30.50 per share.

International Flavors & Fragrances (IFF) is up more than +3% after the company reaffirmed its guidance that Q1 sales would be about $2.95 billion to $3.00 billion.

International Business Machines (IBM) is up more than +2% to lead gainers in the Dow Jones Industrials after Bloomberg Intelligence said it expects the company’s margins will expand by roughly 100 bps in the second half of the year on tighter cost controls.

KeyCorp (KEY) is up more than +5% after Citigroup upgraded the stock to buy from neutral.

BioNTech SE (BNTX) is down more than -3% after forecasting 2023 Covid-19 vaccine revenue of about 5 billion euros, well below the consensus of 8.95 billion euros. Moderna (MRNA) is also down more than -2% on the news.

U.S.-listed Chinese stocks are moving lower after Baidu postponed a media briefing scheduled for today related to its AI chatbot. PDD Holdings (PDD) is down more than -3% to lead losers in the Nasdaq 100. Also, Baidu (BIDU) is down more than -3%, and JD.com (JD) is down more than -2%. In addition, Alibaba Group Holding (BABA) and NetEase (NTES) are down more than -1%.

Frontier Communications (FYBR) is down more than -9% after Morgan Stanley downgraded the stock to underweight from equal weight.

Dish Network (DISH) is down more than -2% after UBS downgraded the stock to neutral from buy.

Ollies Bargain Outlet Holdings (OLLI) is down more than -1% after Citigroup downgraded the stock to sell from neutral.

Across the markets…

June 10-year T-notes (ZNM23) today are down -25 ticks, and the 10-year T-note yield is up +10.1 bp at 3.477%. June T-notes are retreating today as fears of banking-sector contagion eased amid reports of additional support from U.S. authorities. Also, supply pressures are weighing on T-note prices as the Treasury will auction $142 billion of T-notes and floating-rate notes this week, beginning with today’s $42 billion auction of 2-year T-notes.

The dollar index (DXY00) today is down by -0.18%. The dollar today is moderately lower as easing banking concerns have sparked a rally in stocks and reduced the liquidity demand for the dollar. Higher T-note yields today are limiting losses in the dollar.

EUR/USD (^EURUSD) today is up by +0.26%. The euro today is moderately higher on a report from Bloomberg that said ECB Executive Board member Schnabel pushed for the ECB's post-meeting statement this month to say that more interest rate hikes are possible in the future. EUR/USD also garnered support from today’s economic news that showed German Mar IFO business confidence unexpectedly rose to a 13-month high.

Today’s Eurozone economic news was bullish for the euro. Eurozone Feb M3 money supply rose +2.9% y/y, weaker than expectations of +3.2% y/y and the slowest pace of increase in more than eight years. Also, the German Mar IFO business climate unexpectedly rose +2.1 to a 13-month high of 93.3, stronger than expectations of a decline to 91.0.

USD/JPY (^USDJPY) today is up by +0.57%. The yen today is under pressure as easing the recent banking turmoil has sparked a rally in stocks and reduced the safe-haven demand for the yen. Also, higher T-note yields today weigh on the yen.

Today’s Japanese economic news was supportive of the yen. Feb PPI services prices rose +1.8% y/y, stronger than expectations of +1.7% y/y. Also, the Jan leading index CI was revised upward by +0.1 to 96.6 from the initially reported 96.5.

April gold (GCJ3) this morning is down -34.0 (-1.71%), and May silver (SIK23) is down -0.279 (-1.20%). Precious metals prices this morning are moderately lower. An easing of the recent banking turmoil has sparked long liquidation in precious metals as U.S. authorities consider further measures to shore up the balance sheets of regional banks. Higher global bond yields today are also bearish for metals prices. On the positive side, the recent banking turmoil has sparked fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 6-week high last Friday. Also, a weaker dollar today is supportive of metals.

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On the date of publication, Rich Asplund 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.