Stock futures nudge higher as Fed hints at rate hike pause; Yellen says no plan for ‘blanket’ bank deposit insurance’ from Treasury; Coinbase shares tumble after crypto exchange gets SEC Wells Notice; Swiss National Bank hikes rates, says bank crisis ‘halted and Boeing confirms $2.5 billion 737 Max deal with Japan Airlines.
Five things you need to know before the market opens on Thursday March 23:
1. — Stock Futures Nudge Higher As Fed Hints At Rate Hike Pause
U.S. equity futures looked to rebound from yesterday’s slump in pre-market trading Wednesday as investors focus on the Federal Reserve‘s ‘dovish’ rate hike and the chances it will pause its tightening cycle over the coming months.
Fed Chairman Jerome Powell delivered the central bank’s ninth consecutive rate hike Wednesday, taking the Fed Funds rate another 25 basis point higher to a range of between 4.7% to 5% — the highest since 2008 — but in a nod to the ongoing banking crisis, seemed to suggest that future moves might be put on hold as its impact on credit conditions, inflation and the job market, which Powell said could be “the equivalent of a rate hike or perhaps more”, is better understood.
“We did consider [a pause] in the days running up to the meeting,” Powell told reporters during his question-and-answer session with the media in Washington. “So, in assessing the need for further hikes, we’ll be focused as always on the incoming data and the evolving outlook, and in particular on our assessment of the actual and expect effects of credit tightening.”
Benchmark Treasury note yields plunged in the wake of the Chairman’s remarks, with 2-year paper falling holding below the 4% level, at 3.959%, in overnight trading. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, fell another 0.2% overnight to change hands at 102.154, the lowest since February 1.
The CME Group’s FedWatch, meanwhile, is now pricing in a 55% chance that the Fed will pause its rate hike cycle in May, with bets on a cut in the Fund Funds rate outweighing those for a hike at the central bank’s summer meeting in late July
Stocks were firmly higher immediately following the Fed rate decision, but tumbled quickly thereafter following comments from Treasury Secretary Janet Yellen that appeared to rule out a ‘blanket guarantee’ for all deposits held at U.S. banks.
Markets look a bit steadier going into the Thursday session, however, with futures contracts tied to the S&P 500 priced for a firm 19 point opening bell gain and those linked to the Dow Jones Industrial Average indicating a 62 point advance. Tech stocks look set for a boost from the pullback in Treasury bond yields, with the Nasdaq priced for a 135 point gain.
Stocks were mixed in the overnight session, with the region-wide MSCI Asia index rising 1.55% into the close of trading to put the benchmark on pace for its best weekly gain in two months, while Japan’s Nikkei 225 slipped 0.17% lower as the yen rose against the weaker U.S. dollar.
In Europe, the Stoxx 600 was marked 0.38% lower in early Frankfurt trading, while the FTSE 100 fell 0.56% ahead of a closely-tracked Bank of England rate decision later today in London.
2. — Yellen Says No Plan For ‘Blanket’ Bank Deposit Insurance’ From Treasury
Speaking to a Senate Appropriations subcommittee meeting in Washington late Wednesday, Yellen told lawmakers that she had “not considered or discussed anything having to do with blanket insurance or guarantees of deposits” when asked about reports suggesting the Treasury was looking to bypass Congress in order to shore-up confidence in the U.S. banking system.
Yellen instead suggest deposit guarantees be made on a “case-by-case basis”, predicated on any bank failure having the potential to create “systemic risk, which I think of as the risk of a contagious bank run“.
Deposit flight has become the key concern for bank investors since the collapse of Silicon Valley Bank earlier this month, with small regional lender PacWest Bancorp (PACW) – Get Free Report noting a 20% decline since the start of the year and First Republic worried that its wealthy clients — many of whom hold deposits above and beyond the FDIC’s $250,000 limit — will move to a larger financial institution.
First Republic shares, which tumbled 15.5% into the close yesterday, were marked 2.2% higher in pre-market trading at $13.62 each. PacWest was up 4.25% and Western Alliance Bancorporation gained 5.9%.
3. — Coinbase Shares Tumble After Crypto Exchange Gets SEC Wells Notice
Coinbase Global (COIN) – Get Free Report shares fell sharply lower in pre-market trading after the crypto platform said it had received a so-called Wells Notice of impending legal action from the Securities and Exchange Commission.
Coinbase said the Wells Notice was focused on some of its interest-paying products such as Earn, Prime and Wallet and the business concept of ‘staking’, in which customers earn yield by validating transactions on the blockchain.
“We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets,” CEO Brian Armstrong wrote in a company blogpost.
Coinbase shares were marked 11% lower in pre-market trading to indicate an opening bell price of $68.71 each.
4. — Swiss National Bank Hikes Rates, Says Bank Crisis ‘Halted’
The Swiss National Bank raised its benchmark lending rate Thursday, citing ongoing inflation risks to the alpine economy, and said its efforts to rescue Credit Suisse had “put a halt” to the country’s banking crisis.
The SNB lifted its key lending rate for a fourth consecutive time, taking it 50 basis points higher to 1.5%, and cautioned that further hikes could be needed to address “elevated” inflation levels.
The bank, which helped orchestrate the weekend sale of Credit Suisse to its larger Swiss rival, UBS Group (UBS) – Get Free Report over the weekend, added that its actions have “put a halt to the crisis. The SNB is providing large amounts of liquidity assistance in Swiss francs and foreign currencies.”
SNB Chairman Thomas Jordan said allowing a Credit Suisse bankruptcy would have had “serious consequences for national and international financial stability and for the Swiss economy’, and insisted that ‘taking this risk would have been irresponsible.”
UBS Group shares were marked 3.26% lower in Zurich but are still up more than 6% since it purchased Credit Suisse for around $3.25 billion on Sunday.
5. — Boeing Confirms $2.5 Billion 737 Max Deal With Japan Airlines
Boeing BA shares edged higher in pre-market trading after the planemaker agreed the first-ever sale of its workhorse 737 Max jets to Japan Airlines.
JAL said it would buy 21 of the narrow-body 737 aircraft, at a list price of around $2.5 billion, with the aim of adding the planes to its expanding fleet by the year 2026. The deal also represents a major win for Boeing over its European rival, Airbus, which had been courting JAL with its A320neo narrowbody jet.
“The integration of the new 737 MAX will provide JAL with greater efficiency across its short-haul network, as the airline continues to upgrade its world-class fleet,” said Boeing commercial airplanes CEO Stan Deal. “Partnering with JAL to introduce 737-8s into its operations is the latest milestone in our longstanding relationship.”
Boeing, which has received commitments for the sale of more than 200 787 Dreamliners over the past two months, including a $37 billion deal with Saudi Arabia earlier this month, now has an overall aircraft order book that is approaching half a trillion dollars.
Boeing shares were marked 0.7% higher in pre-market trading to indicate an opening bell price of $197.51 each.