To pause, or not to pause, that is the question
DJI, S&P 500 rise, Nasdaq dips
Energy leads S&P 500 sector gainers; tech weakest group
Euro STOXX 600 index closes up 0.98%
Dollar, gold, crude decline; bitcoin up >3%
U.S. 10-Year Treasury yield rises to ~3.46%
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TO PAUSE, OR NOT TO PAUSE, THAT IS THE QUESTION (1215 EDT/1715 GMT)
On Wednesday the Federal Reserve will make their next interest rate decision.
According to Philip Palumbo, founder, CEO and chief investment officer at Palumbo Wealth Management, recent gyrations in Fed rate hike probabilities show that the bond market seems to be as confused as everyone else.
That said, at the moment, the CME's FedWatch Tool is showing around an 80% chance that the Fed raises rates by 25 basis points at the conclusion of the March 21-22 FOMC meeting. There is around a 20% chance for no change, or a pause, in the rate hiking cycle.
As Palumbo sees it, here's what the Fed confronts as they make the decision.
The argument for no increase:
The SVB and Signature Bank failures pressure regional banks and will tighten lending conditions and make capital scarce. Palumbo says that this is doing the Fed’s work for them, so rate increases might not be as necessary as believed.
Additionally, he says that the SVB failure is the result of the rapid rate increases. Raising interest rates again only makes that situation worse.
The argument for hiking 25 basis points:
Inflation is still elevated and still must be addressed. An early pause calls the Fed’s inflation fighting credibility into question.
Palumbo adds that an early pause could give the impression that there is something worse going on that we don’t yet know about.
"Our best guess is a hybrid scenario – a ‘pause without a pause.’"
In other words, Palumbo expects no rate increase, "but the Fed will provide guidance that says more increases are in the cards down the road and this pause is just to allow markets to settle down."
WHILE MOST BIG U.S. BANKS REBOUND, INVESTORS SELL FIRST REPUBLIC (1148 EDT/1548 GMT)
Wall Street's biggest banks started the week on a positive note following an announcement by Swiss authorities on Sunday that UBS UBSG.S agreed to buy battered rival Credit Suisse CSGN.S with an aim to restoring confidence in the banking system after some U.S. bank collapses had shaken investors nerves globally.
The S&P 500 banks index .SPXBK was up 2.1%. Its biggest percentage gainers include Fifth Third Bancorp FITB.O, up 7.7% and Comerica CMA.N up 3.6%.
The largest U.S. banks, known as universal banks, including Citigroup C.N, JPMorgan JPM.N and Bank of America BAC.N are all up, albeit more modestly at >1%.
Keefe, Bruyette & Woods analyst David Konrad wrote in a research note dated for Sunday that the UBS/CS deal is good news for the biggest U.S. universal banks as it should ease concerns about potential counter-party exposure from CS.
That said, the analyst still expects continued volatility in U.S. bank stocks due to ongoing liquidity concerns since the Silicon Valley Bank and Signature Bank failures.
But somewhat reassuringly, Konrad said he does not believe that the CS issues imply a global financial crisis or weakness in global bank fundamentals.
With all this in mind, First Republic FRC.N stuck out like a sore thumb on Monday with a 17.8% decline.
A New York Times report late Friday that it is in talks to raise capital from other banks or private equity firms by issuing new shares is fanning worries about its liquidity even after a $30 billion rescue from 11 big banks last week.
On Friday morning, KBW analyst Christopher McGratty had written that FRC's rescue was not a permanent solution because of a surge in borrowing by the bank at the same time as significant deposit outflows. While the analyst said he did not have spot details on deposits or borrowing, he suggested that "an upside-down funding base is unsustainable."
McGratty said "the changes in FRC's balance sheet in just one week are staggering." And adding in that its dividend suspension "paints a very dire outlook for the company and shareholders," according to McGratty.
On the positive side, McGratty upgraded New York Community Bancorp Inc NYCB.N to outperform from market perform and gave it a $10.50 Price target. NYCB is up 33.9% at $8.76 after a unit of the bank agreed to buy deposits and loans from New York-based Signature Bank, which was shuttered a week ago. McGratty said this suggests a massive 70% accretion to the company's EPS.
Here is a snapshot of SPXBK U.S. banks at 1143 EDT:
BE REASSURED: THE EU IS NOT SWITZERLAND(1120 EDT/1520 GMT)
Credit Suisse CSGN.S shares are still down nearly 60% on Monday, but the mood in markets has seen quite a turn -- for the better.
Investors were thrown into deep angst this weekend after it became clear that the Swiss rescue package would see $17 billion worth of Credit Suisse's AT1 bonds being wiped off, whereas shareholders in the bank recover around $3 billion.
Debt typically outranks equity in failures, so that was a nasty surprise that left investors dealing with the doubt over whether that structure could apply outside Switzerland. The overall AT1 market is estimated at $225 billion, per Citi.
Switzerland "has certainly surprised with the overnight change in law and breaking Capital Structure seniority. This has never happened and it's clearly a very unfortunate Policy Mistake," said Davide Serra, CEO at Algebris Investments.
But after a tense two hours of European trading on Monday, European supervisors -- ECB Banking Supervision, SRB and EBA -- weighed in to dispel doubts. Their release drove an AT1 ETF INAT1.L off lows and eased pressure on bank stocks .SX7P.
"As a result of the release, we understand that the market has turned to well bid from bidless," BofA wrote to clients, according to a trader. The statement in question read: "Common equity instruments are the first ones to absorb losses... This approach has been consistently applied in past cases and will continue to guide the actions" in crisis interventions.
Hence relief in markets.
"The European authorities are clearly differentiating European AT1 from Swiss AT1," added BofA. And Algebris' Serra said: "We do not think there will be long-term structural impact on AT1s in Europe, outside of Switzerland."
MIRROR IMAGE (1005 EDT/1405 GMT)
The Dow Industrials .DJI and S&P 500 .SPX are higher in early trade, while the Nasdaq .IXIC is modestly underwater in early U.S. trade on Monday, although trading has been choppy, as stocks look for some stability in the wake of the deal by UBS UBSF.S to buy Credit Suisse CSGN.S on Sunday.
In a mirror images of last week's action, bank shares jumped, with the S&P 500 banks index .SPXBK up nearly 2% while large-cap growth names are under some pressure. The S&P financial sector .SPSY is among the best performing groups, while tech .SPLRCT and communication services .SPLRCL are lagging.
Still, worries continue to swirl around the banking sector, with First Republic FRC.N down more than 15% after a report the regional bank could raise more money fanned worries about its liquidity despite a $30 billion rescue last week.
In addition, concerns about the banks have fueled uncertainly about the effect it will have on the Federal Reserve's policy announcement on Wednesday and whether the central bank will continue to raise rates or not.
Below is your market snapshot:
WHEN CRISIS IS HERE! CRYPTO TO BE IN TOP GEAR (0912 EDT/1312 GMT)
The global banking stress has rattled most asset classes from equities to bonds, but has given a new lease on life to the cryptocurrency space, paving a way for its redemption post the FTX saga, says Bernstein.
So far this year, crypto is the best performing asset class in 2023 with bitcoin, the biggest cryptocurrency BTC= jumping nearly 71% compared to a meager 2% return for the benchmark S&P 500 index .SPX. Similarly, ether,the second biggest cryptocurrency, has offered returns close to ~50% so far this year.
"Fundamental shift is that crypto is now trading as a risk-off, uncorrelated asset and the last 2 years prior to FTX' demise, was more an aberration as a risk-on asset," says Bernstein.
Bitcoin is hovering near a nine-month high on Monday as turmoil in the banking sector is driving some investors to turn to digital assets. The cryptocurrency is building on its best week in four years.
Crypto has strong survival instincts amidst wider economic uncertainty, with bitcoin having no history of two consecutive years of negative returns, the brokerage said, which could provide a safe house for investors if the current banking crisis continues.
Bitcoin fell about 64.2% in 2022 as some high profile firms went under.
U.S. STOCK FUTURES "SPRING" OFF PREMARKET LOWS (0858 EDT/1258 GMT)
It has been said that history doesn't repeat itself, but it often rhymes.
In this regard, it hasn't been lost on traders that last Thursday's big-bank lifeline to First Republic FRC.N came 15 years to the day that Bear Stearns was sold to JP Morgan.
And in another coincidence, traders also note that the last name of Credit Suisse's chairman is Lehmann. Not exactly Lehman, but pretty darn close.
In any event, the shadow of the bear continues to loom large, especially given the recent banking sector turmoil.
From its February 2 high to its March 13 low, the S&P 500 index .SPX lost about 9%. It has since clawed its way off the low, but ended Friday still down just over 6% from the early-February high.
That said, with the arrival of the spring equinox in the Northern Hemisphere this week, traders will be watching closely to see if the veil of darkness lifts, or if a flurry of darker days lies ahead.
Proponents of Gann Theory, or methods of technical analysis developed by W.D. Gann, as well as other traders with an astro-focus, may look for either an acceleration of the prevailing trend, or a reversal, around the summer and winter solstices, as well as the fall and spring equinoxes.
Just looking back over the past five years or so, a number of major reversals in the S&P 500 have developed around these potential turn dates:
The 2023 spring equinox occurs on Monday, March 20 at 5:24 PM EDT.
Thus, it remains to be seen if last Monday's low came under the equinox's orb of influence, and the SPX will continue to recover, or if instead, volatility will only increase and potentially lead to fresh lows, or indeed, a sustained downside slide. Action over the next week or so may provide clarity.
So far, the SPX has held the 3,815-3,810 support zone on a closing basis. Last Monday, it fell to 3,808.86 before snapping back.
Early on Monday, the futures EScv1 slid about 1.3% as steps taken by central banks to boost liquidity and a deal to rescue Credit Suisse failed to quell investor worries of severe turbulence in the banking sector.
However, the futures have since reversed, and are now in positive territory.
FOR MONDAY'S LIVE MARKETS POSTS PRIOR TO 0858 EDT/1258 GMT - CLICK HERE
Bitcoin refuge amid chaoshttps://tmsnrt.rs/42qdWrl
Early trade March 20https://tmsnrt.rs/42sun6u
S&P 500 bank stocks rise, except First Republichttps://tmsnrt.rs/3lsDbc4
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)</body></html>
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔