Stock futures rise, regional bank shares rise
US stock futures were higher before the open on Tuesday after US and European efforts to stabilize the banking system.
The ripple effects of the bank failures come on the heels of the Federal Reserve’s next interest rate decision on Wednesday. The policy meeting starts on Tuesday.
Futures tied to the S&P 500 (^GSPC) rose 0.6%, while futures on the Dow Jones Industrial Average (^DJI) rose 0.7%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) increased by 0.4%.
Bond yields are rising, “potentially indicating less of a recessionary impulse from the banking system,”[ads1]; according to the US Market Intelligence team at JPMorgan. The benchmark 10-year US Treasury yield rose 3.5% on Tuesday morning. At the leading edge of the yield curve, two-year yields jumped to 4.1%.
The S&P 500 rose nearly 1% to start the new week. According to Bespoke Investment Group data, energy and materials were the top sectors, gaining over 2% each. Technology, consumer and communications services underperformed after last week’s strength.
The week’s main event will be a crucial two-day meeting of the Federal Reserve’s policy committee, where central bank officials face a tough decision on whether to raise interest rates again or take a break amid the turmoil in the banking sector.
Before the Silicon Valley Bank fallout, policymakers were poised to raise interest rates by as much as 50 basis points after a flurry of data showed a robust economy. But given the crisis in the banking sector, many market participants expect a smaller point increase – or none at all.
“Based on Powell’s recent hawkish move in early March, the market still gives the Fed room to hike 25bps at this upcoming meeting, but will not let the Fed get away with more tightening beyond that,” Victor Masotti, director of Repo Trading at Clear Street, wrote in a statement.
The European Central Bank was confronted with a similar scenario on Thursday. As a result, the ECB raised interest rates by 50 basis points, saying it remains committed to taming inflation while monitoring the turmoil in the banking sector.
“Our economists expect the Fed to follow the ECB’s lead and raise interest rates in line with expectations, removing forward guidance but signaling continued tightening,” Jim Reid and colleagues at Deutsche Bank wrote in an early morning note on Tuesday.
With Credit Suisse’s ( CS ) solvency no longer a major concern following this weekend’s forced marriage between UBS ( UBS ) and Credit Suisse, US regional banks remain an area of focus. JPMorgan is reportedly leading talks with other banks about trying to stabilize First Republic ( FRC ) after last week’s $30 billion deposit failed to restore confidence. Shares rose in premarket trading after falling 47% on Monday.
Other regional bank stocks rising Tuesday morning include PacWest Bancorp ( PACW ), Zions Bancorporation ( ZION ), Western Alliance Bancorporation ( WAL ) and Regions Financial ( RF ).
Major bank stocks also rebounded in the premarket, including Bank of America ( BAC ), JPMorgan Chase ( JPM ), Wells Fargo ( WFC ), and Citigroup ( C ).
Meanwhile, the US government is exploring ways to guarantee all bank deposits, an effort that would not require Congress to pass a new law, Bloomberg reported. Treasury Secretary Janet Yellen said at an event Tuesday morning that the government could freeze more deposits if needed for smaller lenders, CNBC reported.
Here is popular tickers on Yahoo Finance:
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Amazon (AMZN): The company plans to make deeper cuts to its workforce, laying off 9,000 more employees in the coming weeks, CEO Andy Jassy announced in a memo to employees on Monday. The move comes after 18,000 workers were made redundant earlier this year.
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Digital World Acquisition Corp. (DWAC): Digital World Acquisition is a SPAC expected to merge with Donald Trump’s Trump Media & Technology Group. The stock witnessed volatility after Trump said he expected to be arrested on Tuesday over alleged hush money payments in 2016.
Outside the Fed’s policy meeting, economic reports will pour in, including housing data, services and manufacturing activity measures from S&P Global.
On the earnings calendar, results from Nike ( NKE ) and Darden Restaurants ( DRI ) will be released this week, providing an update on the state of the consumer.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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