“We have to stop this now.” The First Republic support spreads economic contagion, says Ackman.

The moves illustrate the whipsaw action in stocks and bond yields as traders tried to gauge the severity of the unfolding banking crisis and how much it would compromise central banks’ ability to maintain their anti-inflation strategies.

Concerns that turmoil in the financial sector would have a negative impact on the global economy – and somewhat too long positioning – also caused oil prices to fall.

Still, the stock market rallied on Thursday, and Friday̵[ads1]7;s tone, at least on the surface, is calm as investors appear to be saved by the authorities arranging support for Credit Suisse

CS

,
and First Republic

FRC

in the United States.

But hold on.

The Federal Reserve must expand its balance sheet again after it reported late Thursday that banks this week used their new Bank Term Funding Program to borrow $11.9 billion. In addition, $153 billion was borrowed via the Fed’s discount window and $142.8 billion in bridge loans.

The market does not know who, or how desperate, these borrowers may be.

And others worry that recent moves to help the banking sector are not only filling the cracks, but possibly making things worse.

Hedge fund manager Bill Ackman is not happy that the systemically important banks (SIBs) have been tricked into recycling the deposits they received from First Republic Bank (FRB) back to the struggling lender.

“The result is that the FRB default risk is now spread to our largest banks. Spreading the risk of financial contagion to achieve a false sense of confidence in the FRB is bad policy. The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be stopped if it failed.” Ackman wrote in a tweet late Thursday.

“The press release announcing $30B in deposits raised more questions than it answered. Lack of transparency makes market participants assume the worst. I’ve said before that hours matter. We’ve let the days go by. Half measures don’t work when a crisis of confidence.” he added.

Ackman, who runs Pershing Square Capital Management and is not averse to an apocalyptic outbreak, said the banking sector needed a temporary deposit guarantee immediately until an expanded government insurance scheme is widely available.

“We have to stop this now. We are beyond the point where the private sector can solve the problem and are in the hands of our governments and regulators. Tick ​​Tock.”

Markets

S&P 500 futures

ES00

rose 0.1% as 10-year government yields

TMUBMUSD10Y

fell 4.2 basis points to 3.542%. The dollar index

DXY

lost 0.3%, helping lift gold

GC00

by 0.7% to $1,936 an ounce.

Try your hand at Barron’s crossword and sudoku games, now running daily alongside a weekly digital jigsaw based on the week’s cover story. To see all the puzzles, click here.

The uproar

US economic data due today include industrial production and capacity utilization in February, published at 09.15, followed at 10 a.m. of February’s leading economic indicator index and consumer sentiment report for March. All times Eastern.

It’s another quadruple Witching Friday, with options contracts worth $2.8 trillion expiring.

Anyone who buys First Republic’s shares

FRC

at the opening on Thursday and selling at the close could have made about 60% for the day. The rise came after a consortium of major banks pledged $30 billion in deposits for the lender. However, shares are down 5% at the opening bell on Friday after First Republic said it had to suspend its dividend to save money.

FedEx shares

FDX

is up 11% in premarket action after the package supplier delivered results that showed cost cuts and the opportunity to raise prices helped the bottom line.

Shares in Sarepta Therapeutics

SRPT

falling 20% ​​after the FDA said it would hold an advisory committee on the company’s Duchenne muscular dystrophy treatment.

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The diagram

Here is CNN’s Fear & Greed index. It is a collection of seven indicators: market momentum, share price strength, share price breadth, put and call options, junk bond demand, market volatility and safe haven demand.

Eagle-eyed readers may note that this week it dipped into “Extreme Fear” – below the 25 line – before dipping back to just “Fear”. The last time the chart dipped this low, in October 2022, it marked a recent low for the S&P 500.

Top tickers

Here were the most active tickers on MarketWatch as of 6 a.m. Eastern.

Random reading

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