Futures fall as bank contagion worries grip investors
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[March 24, 2023] By
Amruta Khandekar and Ankika Biswas
(Reuters) - U.S. stock index futures slipped into red on Friday as
lingering concerns over the banking sector's health steered investors
away from financial stocks despite reassurances from authorities.
Treasury Secretary Janet Yellen's reassurances that measures will be
taken to keep Americans' deposits safe amid turmoil in the banking
sector, sparked by the collapse of two U.S regional banks, had driven
Wall Street's main indexes higher on Wednesday.
The comments added to the upbeat mood fueled by growing expectations
that central banks were close to ending their aggressive rate hike
campaign as the Fed and the Bank of England signaled caution about their
next moves amid the global banking crisis after raising rates as
expected.
"The volatility is continuing because the concerns are still bubbling
about just how stable the U.S. banking sector is," said Susannah
Streeter, head of money and markets, Hargreaves Lansdown.
"Although they (central bankers and the U.S. Treasury) are trying to
reassure markets that they'll be standing by to take action if
necessary, what investors are taking this as is the fact that
regulators, central bankers and the U.S. government is still concerned
about the potential for contagion."
Shares of major U.S. banks JPMorgan Chase & Co, Wells Fargo and Bank of
America dropped more than 2% in premarket trade.
Shares of regional lenders First Republic Bank, PacWest Bancorp, Western
Alliance Bancorp and Truist Financial Corp fell between 2.1% and 2.8%.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., March 23, 2023.
REUTERS/Brendan McDermid
European banks also came under pressure, with a report of a U.S.
probe on Credit Suisse and UBS further souring the mood. Their
U.S.-listed shares were down about 6% each.
With traders' bets now tilted towards a pause in the Fed's rate
hikes in May, U.S. Treasury yields fell for a third straight day,
with the yield on the two-year note last at 3.6%.
On the economic data front, a report due at 8:30 am ET is expected
to show orders for durable goods rose last month, while S&P Global's
survey due after the opening bell is expected to show a weakening in
U.S. manufacturing activity in March.
Investors will also keep an eye out for remarks by Fed's St. Louis
President James Bullard on the U.S. economy and monetary policy
later in the day.
At 6:35 a.m. ET, Dow e-minis were down 304 points, or 0.94%, S&P 500
e-minis were down 31.5 points, or 0.79%, and Nasdaq 100 e-minis were
down 59 points, or 0.46%.
Among major movers, Block Inc slumped 4.2% in premarket trading, and
looked set to extend losses from Thursday when Hindenburg Research
disclosed short positions in the payments firm.
(Reporting by Amruta Khandekar and Ankika Biswas; Editing by Sriraj
Kalluvila and Vinay Dwivedi)
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