June S&P 500 futures (ESM23) are up +0.34%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.15% this morning as market participants welcomed the news that First Citizens BancShares had agreed to acquire Silicon Valley Bank’s deposits and loans.
In Friday’s trading session, Wall Street’s major averages recovered from an early dip and ended moderately higher as bank stocks rebounded after the Financial Stability Oversight Council, convened by Treasury Secretary Yellen, said in a statement Friday afternoon that “while some institutions have come under stress, the U.S. banking system remains sound and resilient.” At the same time, investors continued to bet the Fed would pause its interest rate hikes at the next monetary policy meeting in May.
First Citizens BancShares Inc (FCNCA) agreed to buy most of Silicon Valley Bank’s deposits and loans from the Federal Deposit Insurance Corporation, the regulator said in a statement on Monday. The deal included the purchase of approximately $72B of SVB assets at a discount of $16.5B. The lender also said it would assume $56B in deposits. In addition, the FDIC received equity appreciation rights in First Citizens’ stock with a potential value of up to $500M.
Over the weekend, Bloomberg News reported that U.S. regulators are considering the expansion of an emergency lending facility for banks in ways that could give First Republic Bank additional time to shore up its balance sheet. All discussions are at an early stage, and officials have yet to decide on what support they could provide First Republic, with an expansion of the Federal Reserve’s emergency lending program being just one of several options, Bloomberg said, citing people with knowledge of the situation.
Meanwhile, Minneapolis Fed president Neel Kashkari said Sunday in comments to the CBS show Face the Nation that the recent bank turmoil has brought the U.S. closer to recession. “It definitely brings us closer. What’s unclear is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch ... would then slow down the economy. This is something we are monitoring very, very closely,” Kashkari said.
In the coming week, the February reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight. Also, market participants will be eyeing a spate of economic data, including the U.S. CB Consumer Confidence, Goods Trade Balance (preliminary), Wholesale Inventories (preliminary), S&P/CS HPI Composite - 20 n.s.a., Richmond Manufacturing Index, Pending Home Sales, Crude Oil Inventories, GDP, GDP Price Index, Initial Jobless Claims, PCE Price index, Personal Income, Personal Spending, Chicago PMI, Michigan Consumer Expectations, and Michigan Consumer Sentiment.
In addition, several Fed officials will be making appearances this week, including Boston Fed President Susan Collins, Richmond Fed President Tom Barkin, and governors Christopher Waller and Lisa Cook.
The U.S. economic data slate is mainly empty on Monday. However, investors will likely focus on a speech from Fed Governor Philip Jefferson for fresh clues on the outlook for rates.
In the bond markets, United States 10-Year rates are at 3.441%, up +1.88%.
The Euro Stoxx 50 futures are up +0.93% this morning, helped by a rebound in regional bank stocks on news that First Citizens BancShares Inc agreed to acquire Silicon Valley Bank’s deposits and loans. Also, European Central Bank President Christine Lagarde told European Union leaders Friday that the Eurozone banking sector remains healthy due to the strong regulatory regime. In corporate news, Novartis Ag (NOVN.Z.IX) climbed over +6% after the Swiss drugmaker reported positive trial data for its breast-cancer drug Kisqali.
Germany’s Business Expectations, Germany’s Current Assessment, Germany’s Ifo Business Climate Index, and Eurozone’s M3 Money Supply data were released today.
The German March Business Expectations stood at 91.2, stronger than expectations of 88.3.
The German March Current Assessment came in at 95.4, stronger than expectations of 94.1.
The German March Ifo Business Climate Index has been reported at 93.3, stronger than expectations of 91.0.
Eurozone February M3 Money Supply was at 2.9% y/y, weaker than expectations of 3.2% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.44%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.33%.
China’s Shanghai Composite today closed lower, with energy and chemical stocks leading the falls. China Petroleum & Chemical Corp slid over -3% after the company recorded a 6.9% drop in net income for 2022 as a string of COVID-19 curbs dented fuel demand. Also, a senior Communist Party official said Saturday that the foundation of Chinese economic recovery “is not solid enough,” warning about potential spillover effects from global economic problems. In addition, government data on Monday showed that Chinese industrial profit fell -22.9% in the first two months of 2023, indicating that the factory sector was still struggling even after the country eased its COVID-19 restrictions.
At the same time, Japan’s Nikkei 225 Stock Index closed higher as prospects for monetary policy tightening lessened after a recent inflation reading showed that inflation in the country was easing from over 40-year highs. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.70% to 19.08.
Pre-Market U.S. Stock Movers
First Citizens BancShares Inc (FCNCA) climbed about +12% in pre-market trading after the lender said it had acquired Silicon Valley Bank’s deposits, loans, and certain other assets from the FDIC.
First Republic Bank (FRC) soared over +24% in pre-market trading following the SVB deal.
Berkshire Grey Inc (BGRY) surged over +17% in pre-market trading after the company announced it had entered into a merger agreement with SoftBank Group and its affiliate.
Sanofi ADR (SNY) rose about +1% in pre-market trading after Barclays upgraded the stock to overweight from equal weight.
BridgeBio Pharma Inc (BBIO) climbed over +7% in pre-market trading after Bloomberg reported that the company was attracting takeover interest from big pharma companies.
Orange SA ADR (ORAN) gained over +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - March 27th
BioNTech (BNTX), Huazhu (HTHT), Carnival Corp (CCL), Legend Bio (LEGN), Yamana Gold (AUY), Industrias Penoles (IPOAF), PVH (PVH), Sprott Physical Gold and Silver Trust (CEF), Lithium Americas (LAC), Burford (BUR), Arcellx (ACLX), Opal Fuels (OPAL), ETV Limited Duration (EVV), Noah (NOAH), Seabridge Gold (SA), POINT Biopharma Global (PNT), Riley Exploration Permian (REPX), G City (GZTGF), Avadel Pharma (AVDL), Virtus Equity Convertible (NIE), DXP Enterprises (DXPE), Apollo Endosurgery (APEN), Vaalco Energy (EGY), Biomea Fusion (BMEA), Terns Pharmaceuticals (TERN), GreenTree Hospitality (GHG), Disc Medicine (IRON), Tango Therapeutics (TNGX), Gold Royalty (GROY), Urban One Inc (UONE), Canacol Energy (CNNED), Acumen Pharmaceuticals (ABOS), StarTek (SRT), Real Good Food (RGF), Uxin (UXIN), CytomX Therapeutics Inc (CTMX), Forian (FORA), Gamida Cell (GMDA).
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