An Itou BBA analyst is two tech stocks down after the second-biggest bank closing in US history on Friday.
Regulators shut down part of Silicon Valley bank, SVB Financial (ticker: SIVB), on Friday after the lender was squeezed by rising interest rates and shrinking deposits. Last week, it sold securities at a loss and tried to raise capital, but it could not overcome the significant outflow of deposits.
Investors are unsure what this news could mean for other banks and the broader economy.
(MSFT) Itau was edged higher on Monday by BBA analyst Thiago Alves Kapulskis, who advised investors to “retain and reduce risk” in a research note as the future of the market remains unclear.
Kapulskis wrote that even though he is “cautious in this environment”, he remains a believer in shares of both.
“In our US coverage, we favor all big tech, but our immediate preference is for Apple and Microsoft, as they have the strongest balance sheets and profitability/stability,” Kapulskis wrote in the note.
Investors were becoming even more certain on Monday that the Federal Reserve was going to slow or stop its current path of aggressive monetary policy. This is good news for companies like Apple and Microsoft.
Traders are currently pricing in a 63.5% chance the Fed will hike interest rates by a quarter percentage point at its March meeting, with a 36.5% expectation at the March meeting, according to the CME Fed Watch tool. Traders put the odds of a half a percentage point rate hike at zero, down from 40.2% a day earlier.
Higher interest rates hurt tech stocks because they make future earnings less valuable. The SVB felt the pain of higher interest rates, and the fallout from the Fed’s prior rate decisions convinced traders that the central bank could slow rate hikes, or halt them all together.
Apple shares were up 2.3% on Monday while Microsoft stock climbed 2.8%.
was up 0.9%.
Write to Angela Palumbo at [email protected]