Market Snapshot: Nasdaq futures up 100 points as U.S. regulators shore up banking system after SVB collapse
U.S. stock futures rallied on Monday as investors welcomed the authorities’ attempts to stem banking sector angst.
How are stock-index futures trading
S&P 500 futures
ES00,
+0.37%
rose 28 points, or 0.7%, to 3891
Dow Jones Industrial Average futures
YM00,
-0.06%
gained 116 points, or 0.4%, to 32281
Nasdaq 100 futures
NQ00,
+0.79%
added 103 points, or 0.8%, to 12063
On Friday, the Dow Jones Industrial Average
DJIA,
-1.07%
fell 345 points, or 1.07%, to 31910, the S&P 500
SPX,
-1.45%
declined 57 points, or 1.45%, to 3862, and the Nasdaq Composite
COMP,
-1.76%
dropped 199 points, or 1.76%, to 11139.
What’s driving markets
Risk appetite was emboldened on Monday after U.S. authorities stepped in to inoculate the banking sector following the collapse of Silicon Valley Bank parent SVB Financial
SIVB,
-60.41%
as well as Signature Bank
SBNY,
-22.87%.
’White knights are coming to the rescue after a weekend of intense negotiations to stem contagion from the SVB collapse, which sent shockwaves through financial and tech sectors,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Investors are waiting with bated breath to see if this rush of regulatory activity to try and limit the fallout from the SVB bank collapse will help soothe volatile markets and so far the bold action appears to be working,” Streeter added.
Also supporting the bullish mood were further sharp falls in short-duration government bond yields as investors made bets that the financial instability will encourage the Federal Reserve to ease its monetary tightening policy but that the fall out from the banking crisis will not damage the economy much.
The 2-year Treasury yield
TMUBMUSD02Y,
4.242%,
which last week was trading at 15-year highs above 5%, on Monday was down to 4.42%, off another 17 basis points for the session.
The chances of the Fed hiking interest rates by 50 basis points next week have fallen over recent sessions from 70% to zero, according to action in Fed funds futures. The central bank is now expected to raise borrowing costs by 25 basis points as it strives to suppress inflation running at more than three times its 2% target.
“We believe the Fed’s reaction function potentially needs to adjust…if the Fed continues to raise rates, the stresses on bank business models will grow,” said Tom Lee, head of research at Fundstrat.
“And the damage to Silicon Valley/VC/Start-ups means that Fed is aware there is now further forces have been unleashed to slow employment growth (Fed focus) without having to raise rates. Similarly, slowing credit growth means slower economy.
“In other words, we think the Fed could move away from ‘higher for longer’ to a possible pause…Overall, this should be positive for stocks into the remainder of 2023, once we are past these initial after-shocks,” Lee concluded.
