Futures steady as banks rebound; inflation data on tap
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[March 14, 2023] By
Shubham Batra and Amruta Khandekar
(Reuters) -U.S. stock index futures rose on Tuesday after a volatile
session amid fears of a banking crisis, while investors looked ahead to
an inflation report that could determine whether the central bank will
pause its rate hikes in March.
The recent shutdown of SVB Financial and peer Signature Bank has fueled
fears of risks to the health of other banks from surging interest rates,
hammering the sector and the broader market sentiment in the last few
days.
Investors are now hoping that the threat of a financial crisis could
force the U.S Federal Reserve to ease up on monetary tightening. Money
market traders have already abandoned wagers of a steep 50 basis point
increase next week.
They are largely expecting a 25-basis-point rate hike in March, while
bets that the Fed would stay put stood at 27%..
The Labor Department's February consumer prices report, due at 8:30 am
ET, will also feed into the Fed's policy decision at its March meeting.
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A Reuters poll of economists showed that the U.S. Consumer Price Index
(CPI) likely increased by 0.4% last month after accelerating 0.5% in
January amid sticky rental housing costs.
On a yearly basis, CPI is expected to rise 6.0% in February, moderating
from a 6.4% rise the previous month.
"If we get a slightly poorer figure, people will then hope for an
outright pause but if we get a better figure, people will say the Fed
will probably do a quarter (bps rate hike)," said Andrew Bell, chief
executive officer of Witan Investment Trust.
"The central banks are either likely to hit a pause and raise rates more
slowly than we thought only a week ago. If this proves to be small storm
covering only a limited number of poorly run banks, then the Fed can
certainly come back in and say inflation is a bigger problem."
The yield on two-year Treasury notes, which best reflect interest rate
expectations, tumbled below the 4% mark on Monday and is currently at
4.3%.
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A Wall St. sign is seen in New York
City, U.S., March 13, 2023. REUTERS/Brendan McDermid
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Regional bank stocks rebounded in premarket trading. First Republic
Bank jumped 22.1% a day after the mid-cap lender's executive chair,
Jim Herbert, told CNBC the bank has been able to meet withdrawal
demands with additional funding from JPMorgan Chase & Co.
At 6:29 a.m. ET, Dow e-minis were up 139 points, or 0.44%, S&P 500
e-minis were up 18 points, or 0.47%, and Nasdaq 100 e-minis were up
44.5 points, or 0.37%.
Big U.S. banks, including JPMorgan Chase & Co, Citigroup and Wells
Fargo, gained between 1.2% and 3.4% after losing ground in the
previous session.
U.S.-listed Chinese stocks such as Alibaba Group Holdings Ltd,
JD.Com Inc and Baidu Inc were down between 0.7% and 2% on fears of
contagion from the SVB collapse.
Shares of ride-hailing companies Uber Technologies Inc and Lyft Inc
rose 7.1% and 6.4%, respectively, after a California state court
revived a ballot measure allowing app-based services to treat
drivers as independent contractors rather than employees.
United Airlines Holdings Inc fell 6% after the U.S. carrier on
Monday forecast an unexpected loss in the current quarter, citing
lower demand.
(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru;
additional reporting by Sruthi Shankar, Editing by Saumyadeb
Chakrabarty)
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