Futures edge lower as yields rise amid easing bank contagion fears

[March 28, 2023]  By Shubham Batra and Amruta Khandekar

(Reuters) -U.S. stock index futures slipped on Tuesday as Treasury yields rose amid easing worries about a banking crisis following First Citizens BancShares' U.S. regulator-backed deal for failed Silicon Valley Bank.

Benchmark 10-year yields rose to 3.545%, weighing on growth stocks such as Apple Inc, Meta Platforms and Alphabet Inc in premarket trade.

Shares of First Citizens BancShares Inc fell 1% in premarket trading after surging more than 50% on Monday following its deal to acquire the deposits and loans of failed Silicon Valley Bank.

The S&P 500 and Dow Jones Industrial Average rose on Monday after the deal was announced, while the Nasdaq Composite closed lower, led by a decline in technology-related stocks.

Big U.S. banks including JP Morgan Chase & Co, Bank of America and Citigroup were up between 0.1% and 0.5% on Tuesday. Regional banks also rose, led by First Republic Bank's 2.2% gain after a 12% rally on Monday.

"It’s all about confidence right now – and anything which reassures shareholders, creditors and depositors that their money is safe with the banks is one step further away from the carnage which claimed SVB and Credit Suisse," said AJ Bell's investment director Russ Mould.

"Whether a more cautious approach to lending by the industry might do some of the work for central banks is something they are all likely to be monitoring closely in the coming weeks."

Later in the day, Fed Vice Chair for Supervision Michael Barr will testify before the Senate Committee on Banking, Housing and Urban Affairs on "bank oversight" in the first of several hearings on the collapse of Silicon Valley Bank and Signature Bank.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 27, 2023. REUTERS/Brendan McDermid

Money market bets are now equally split between the Fed raising rates by 25 basis points and pausing in its policy meeting in May, after being largely tilted towards a no-hike scenario at the end of last week, according to CME's Fedwatch tool. Investors expect a sharp easing in rates thereafter.

At 6:56 a.m. ET, Dow e-minis were down 31 points, or 0.1%, S&P 500 e-minis were down 6.75 points, or 0.17%, and Nasdaq 100 e-minis were down 27.75 points, or 0.22%.

Alibaba Group Holding climbed 6.8% after the firm said it plans to split its business into six main units covering e-commerce, media and the cloud.

Shares of Lyft Inc were up 7.1% premarket after the ride-hailing firm hired former Amazon.com executive David Risher as its new chief.

Virgin Orbit Holdings was down 14.6% after the cash-strapped company said it would extend an unpaid furlough for most of its employees as talks seeking new funding continue.

Walgreens Boots Alliance Inc shares added 2.1% premarket after the company's quarterly profit beat Wall Street expectations.

The Conference Board will release consumer confidence data later in the day, which is expected to show prevailing business conditions marginally deteriorated last month.

(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Savio D'Souza)

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