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S&P 500, DJI dip, Nasdaq edges red; banks weak
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Energy weakest S&P 500 sector; cons disc leads gainers
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Euro STOXX 600 index ~flat
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Dollar dips; gold, bitcoin gain; crude down >2%
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U.S. 10-Year Treasury yield falls to ~3.40%
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WALL STREET OPENS LOWER WITH BANKS IN FOCUS (1021 EDT/1421 GMT) Wall Street's major averages are lower in early trade on Thursday with bank stocks in decline again due to continuing jitters over the stability of the global financial system after Credit Suisse said it was availing itself to a financial lifeline from the Swiss National Bank.
Investors have been nervous about the global financial sector since three U.S. banks have failed in the last week.
Among the S&P 500's 11 major sectors, the energy index is falling most in sympathy with declining oil futures as market sentiment about the global economy is fragile. The S&P 500 banks sector is last down ~2% with Frist Republic Bank down more than 30% after a report late on Wednesday that it was weighing options, including a sale. The company, which last traded around $20, had closed at $123.22 on March 3, before a massive sell-off kicked off. Here is your early snapshot:
(Sinéad Carew)
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QUESTION FOR BANKS: GOT LIQUIDITY? (0915 EDT/1315 GMT) In light of the collapse of Silicon Valley Bank and rising interest rates, it's time for global regulators to look more closely at liquidity requirements, according to Mayra Rodriguez Valladares, managing principal at banking and regulatory consultancy MRV Associates.
Revisiting liquidity rules is especially vital as major central banks are not expected to slam the brakes on interest rate hikes, Valladares said, which will continue to hit banks' bond holdings.
"Rising interest rates will continue to put downward pressure on banks' bond values, which then means that their liquidity also goes down," she said, adding that job cuts in the tech sector persist, which could result in a double whammy of these firms continuing to draw on deposits, while potentially facing trouble in servicing their loans.
Rapid withdrawals caused a liquidity crisis at SVB , forcing the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to step in, but this could have been avoided if SVB was classified as "systematically important," Valladares noted.
"That would have allowed the Federal Reserve to receive daily liquidity information about the bank ... this is a sign for regulators in Asia and Europe as well that they need to look closely at banks' liquidity especially since inflation has not been tamed," she told the Reuters Global Markets Forum.
That may be occurring - the Fed is reportedly considering tougher rules and oversight for midsize banks similar in size to SVB. Banks also need to diversify their sources of funding to prevent liquidity mismatches, according to Valladares.
That view was echoed by Moorad Choudhry, Director at Recognise Bank and author of "The Principles of Banking", who told the forum banks should hold more liquid assets, such as short-duration Treasury bills to "hold against a stress event."
(Divya Chowdhury, Lisa Mattackal)
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DESPITE MARKET TURMOIL, NASDAQ COMPOSITE SCORES GOLDEN CROSS (0900 EDT/1300 GMT) The Nasdaq Composite ended Wednesday at 11,434.052, and has now risen three-straight days putting it up 2.7% for the week so far. Even though Wednesday's rise of just 0.052% was not much to speak of, it was enough for its 50-day moving average (DMA) to cross above its 200-DMA for a golden cross:
The 50-DMA crossed below the 200-DMA (a death cross) on Feb.
18, 2022. The intermediate-term moving average had been below
the longer-term moving average for 267-straight trading days.
That was the longest such streak since a 348-day trading-day run
from January 2008 to June 2009.
The 50-DMA (11,400.762) ended above the 200-DMA (11,399.865)
by less than one point, so traders will be watching to see if it
can be sustained. Nevertheless, this action may hearten bulls as
it can suggest potential that a major advance is underway.
Meanwhile, markets are digesting another batch of U.S.
economic data released at 0830 EST.
Initial jobless claims were below the estimate, while
February housing starts were greater than expected. The March
Philly Fed Business Index was weaker than the Reuters poll. Feb
import/export prices month-over-month were both above estimates.
According to the CME's FedWatch Tool, the probability of a
25 basis point rate hike at the March 21-22 FOMC meeting is now
61% from around 67% just before the numbers were released. There
is now around a 39% chance that the FOMC will leave rates
unchanged from around 33% prior to the data coming out.
U.S. stock index futures were mixed and little changed ahead
of this as the Swiss central bank's lifeline for embattled
Credit Suisse did little to boost investor sentiment. Markets
may have been awaiting the data for clues on the outlook for
U.S. interest rates.
E-mini S&P 500 futures are now off about 0.3% vs
roughly flat just before the data came out.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
