Markets Today: Stocks See Boost From Credit Suisse Takeover But Banking Concerns Continue

Morning Markets

March S&P 500 futures (ESM23) this morning are up +0.19%, and March Nasdaq 100 E-Mini futures (NQM23) are up +0.13%.

U.S. stock index futures this morning gave up most of their overnight gains and are slightly higher as authorities attempt to boost confidence in the banking sector.  Stock index futures initially jumped after UBS Group AG agreed to buy Credit Suisse Group AG for 3 billion francs ($3.2 billion) in a government-brokered deal.

However, concern about banking system contagion continues in pre-market trading.  First Republic Bank is down more than -18% and is dragging peers lower after S&P Global cut First Republic Bank's long-term issuer credit rating for the second time in less than a week.

UBS Group AG agreed to buy Credit Suisse Group AG for 3 billion francs ($3.2 billion) in a government-brokered deal in which the Swiss central bank is offering 100 billion francs in liquidity assistance to UBS and is granting a 9-billion franc guarantee for potential losses from assets UBS is taking over.

On Sunday, the Federal Reserve, along with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank, announced they would "increase the frequency of 7-day maturity operations from weekly to daily" to boost dollar funding and ease strains in the global financial system.

Global bond yields are falling this morning as concerns mount that the turmoil rocking the banking sector will tip the global economy into recession.  The 10-year T-note yield today dropped to a 6-month low of 3.286%, the 10-year German bund yield fell to a 3-month low of 1.924%, and the 10-year UK gilt yield slid to a 6-week low of 3.133%.. 

On the positive side for stocks, cryptocurrency-exposed stocks are moving higher in pre-market trading, with the price of Bitcoin jumping more than +5% to a 9-month high.  Also, mining stocks are moving higher, with the price of gold up more than +1% to a 1-year high.  

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.68%.  China’s Shanghai Composite stock index closed down -0.48%, and Japan’s Nikkei Stock Index closed down -1.42%. 

The Euro Stoxx 50 index today recovered from a 2-1/2 month low and is moderately higher.  The strength in mining stocks is boosting the overall market, with gold climbing to a 1-year high.  Also, interest-rate sensitive utility stocks are moving higher as European government bond yields tumble.  

However, concerns about contagion from the ongoing banking turmoil in the U.S. and Europe are weighing on bank stocks, even after UBS AG agreed to purchase Credit Suisse Group AG in a government-brokered $3.2 billion deal.  Credit Suisse Group AG is down more than -60%, and UBS AG is down more than -7%.  The banking turmoil fueled a flight to safety into government debt and knocked bond yields lower, with the 10-year German bund yield tumbling to a 3-month low and the 10-year UK gilt yield falling to a 6-week low. 

ECB Governing Council member Kazaks said price pressures remain too strong and warrant further action, assuming the market turmoil that rocked the banking sector doesn't worsen to derail Europe's economy.

German Feb PPI eased to +15.8% y/y from +17.6% y/y in Jan, the slowest pace of increase in 17 months.

China’s Shanghai Composite today erased an early rally and closed moderately lower.  China’s financial and banking stocks led losses today in the overall market after UBS Group’s purchase of Credit Suisse Group AG failed to quell concerns about the health of the global financial system.  The Shanghai Composite today initially moved higher after the PBOC cut the reserve requirement ratio for banks last Friday after the close of trading.

Japan’s Nikkei Stock Index today closed moderately lower.  A slump in Japanese bank stocks weighed on the overall market on concern about contagion from the banking turmoil in Europe and the U.S.  Also, exporter stocks retreated as strength in the yen dampens earnings prospects of exporters as the yen climbed to a 5-week high today against the dollar. 

Pre-Market U.S. Stock Movers

First Republic Bank (FRC) is down more than -18% in pre-market trading after S&P Global cut First Republic Bank's long-term issuer credit rating to B+ from BB+ and as the emergency sale of Credit Suisse Group AG to UBS Group AG failed to boost confidence in the banking sector.  Other regional bank stocks are also under pressure, with Western Alliance Bancorp (WAL), Comerica (CMA), Huntington Bancshares (HBAN), and Regions Financial (RF) down -5% or more.

Major U.S. banks are sliding in pre-market trading after the government-backed deal for UBS AG to acquire Credit Suisse failed to fully ease concern about the longer-term health of the global financial industry. Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) are down -1% or more. 

Energy stocks and energy service providers are under pressure in pre-market trading, with the price of WTI crude down more than -1% to a 15-1/2 month low.  Chevron (CVX), Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobil (XOM), Haliburton (HAL), Occidental Petroleum (OXY), and Valero Energy (VLO) are down -1% or more.

PDD Holdings (PDD) sank more than -13% in pre-market trading after reporting Q4 revenue of 39.82 billion yuan, well below the consensus of 41.95 billion yuan.   

VF Corp (VFC) gained more than +1% in pre-market trading after Williams Trading LLC upgraded the stock to buy from sell.

Newmont (NEM) is up more than +1% in pre-market trading to lead mining stocks higher as the price of gold climbed to a 1-year high.

US Bancorp (USB) climbed more than +1% in pre-market trading after Baird upgraded the stock to outperform from neutral.

Westrock (WRK) rose more than +2% in pre-market trading after Citigroup upgraded the stock to buy from neutral.

Cryptocurrency-exposed stocks are moving higher in pre-market trading, with the price of Bitcoin up more than +5% at a 9-month high.  Marathon Digital (MARA), Riot Platforms (RIOT), Coinbase Global (COIN), Hive Blockchain (HIVE), and Stronghold Digital (SDIG) are up +4% or more.

Karuna Therapeutics (KRTX) surged more than +15% in pre-market trading after its schizophrenia drug, KarXT, met the primary goal in a Phase 3 trial. 

Today’s U.S. Earnings Reports (3/20/2023)

Arcellx Inc (ACLX), Foot Locker Inc (FL), National Energy Services Reunited Corp (NESR).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.