Stock futures were lower on Friday morning as investors digested one of the worst days of news flow on Thursday, which ended with a consortium of 11 large US banks calling on the First Republic (FRC) to stabilize the banking system. ) banded together to accumulate $30 billion.
As of 8:30 a.m. ET, Dow futures were down about 0.7%, S&P 500 futures were down 0.6%, while Nasdaq futures were off 0.3%.
Stocks rallied sharply on Thursday after news broke throughout the day that big banks, led by JPMorgan (JPM) and Bank of America (BAC), would infuse First Republic with capital for the struggling bank’s industry bailout. .
The firms finally announced their deal to backstop First Republic about half an hour before the market closed.
Speaking with Yahoo Finance Live on Thursday, longtime banking analyst Dick Bove said the near-term banking crisis is over after these moves.
Shares of First Republic, which rallied to fluctuate several times on Thursday, were down about 13% in pre-market trade on Friday. The broader banking sector was also lower early on Friday.
Investors were also tracking crude oil prices, with WTI crude trading near $68.80 per barrel, a nearly 15-month low as oil prices came under heavy pressure last week.
The Treasury market will also remain a focus, with the 10-year yield nearing 3.58% early Friday, just over a week after topping 4%.
In a note to clients on Thursday, analysts at Bespoke Investment Group highlighted that some of the recent volatility in the Treasury market — particularly with shorter-dated Treasuries that tend to be more sensitive to Fed expectations — likely ” Come from “forced”. non-discretionary) buying and selling, and the price that price-insensitive buyers or sellers agree to is not necessarily inclusive of all information available.”
“Another example is the massive inflow of cash into money market funds this week reported by the ICI: total fund assets increased by 2.5%, or $121bn, and money funds were forced to put that cash to work. which adds to the short-term interest rate buying pressure,” the firm wrote. “Falling bill yields and very high volatility are consistent with the idea that money fund flows are forcing buying in specific markets.”
In a note to clients on Friday, Thomas Matthews, senior markets economist at Capital Economics, echoed the view that the Fed’s benchmark interest rate is now down about 2 percentage points in late 2023, taking into account the front-end of the Treasury curve. It has come where investors were expecting just one week. Earlier
“There is a good chance, in our view, that investors are now underestimating how much central bankers will raise rates over the next few months,” Matthews wrote. “As such, we suspect the rally in short-dated bonds may go in reverse.”
The Fed will announce its next policy decision on Wednesday, March 22, with investors pricing in about 80% likelihood the central bank will hike rates another 0.25%, According to data from CME Group,
Friday’s corporate earnings schedule is quiet, with the economic calendar giving US investors an early look at consumer sentiment in March as top highlights from the University of Michigan.
Friday also marks a quadruple witching in US markets, with contracts on single stock options and futures, as well as index options and futures, all expiring at today’s close.
There will also be reshuffling in some sectors of the S&P 500, with S&P reclassifying 14 stocks in the index into new sectors as of today’s close.
The most notable names on the move include Target (TGT), Dollar General (DG), and Dollar Tree (DLTR), which will move from the consumer discretionary (XLY) sector to consumer staples (XLP). Other notable companies in moving sectors include Visa (V), MasterCard (MA), and PayPal (PYPL), which will be shifting from technology (XLK) to financials (XLF).
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