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S&P 500, DJI edge green, Nasdaq slightly red
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Utilities lead S&P 500 sector gainers; cons disc weakest
group
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S&P 500 banks index off >0.8%; KBW regional banks index up
~1.8%
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Dollar up; gold, crude, bitcoin decline
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U.S. 10-Year Treasury yield slips to ~3.37%
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LOOKING FOR A CREDIT CRUNCH? WATCH DEPOSIT RATES: FORMER FED GOV STEIN (1320 EDT/1720 GMT) While the actions of the Federal Reserve and FDIC have likely stemmed further runs on U.S. banks a la Silvergate and Silicon Valley Bank, the real crunch test for banks -- and the economy -- will be how deposit rates reprice, said Harvard economist Jeremy Stein.
"I really want to know bank by bank what's happening to their interest expense on deposits, that's going to tell you a lot about whether this begins to create a real strain," Stein, a former member of the Federal Reserve Board of Governors, told the Reuters Global Markets Forum.
In previous economic downturns, financial institutions could typically count on "sticky" depositors who wouldn't move funds between banks, meaning banks' interest expenses on those deposits remained below that of other market instruments.
However, this could change given U.S. regulators have not expanded deposit insurance for all banks and consumers may be uneasy after high profile bank runs, Stein said.
"There's going to be a bunch of deposits flowing out of individual banks now in a way that wouldn't have happened if there was a blanket guarantee," he said, adding this likely will force banks to up the interest they offer on deposits. It's presently uncertain how fast and to what extent interest expenses could reprice, Stein added.
However, he noted this will be a significant factor in how severe a so-called credit crunch will be and impact the overall economy.
(Lisa Mattackal)
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NEARLY HALF OF INDIVIDUAL INVESTORS BEARISH -AAII (1207 EDT/1607 GMT) Pessimism among individual investors moved closer to 50% in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, optimism bounced, while neutral sentiment ended its streak of above-average readings.
AAII reported that bearish sentiment, or expectations that stock prices will fall over the next six months, rose 0.5 percentage points to 48.9%. Pessimism was last higher on December 22, 2022 (52.3%). "This is the fourth consecutive week and the 43rd time out of the past 64 weeks that bearish sentiment is at an unusually high level."
Bearish sentiment is also above its historical average of 31.0% for the 65th time out of the past 70 weeks. Bullish sentiment, or expectations that stock prices will rise over the next six months, increased 1.7 percentage points to 20.9%. "Optimism is at an unusually low level for the fifth consecutive week and the 45th time out of the past 64 weeks." Bullish sentiment is also below its historical average of 37.5% for the 68th time out of the past 70 weeks. Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, dipped 2.2 percentage points to 30.2%. The drop puts neutral sentiment below its historical average of 31.5% for the first time since December 29, 2022 (25.9%). With these changes, the bull-bear spread narrowed to -27.9 percentage points from -29.2 percentage points last week. The spread remains "unusually low for the fifth consecutive week," and is at an "unusually low level for the 47th time out of the past 64 weeks":
AAII noted that this week’s bullish sentiment reading ranks among the 70 lowest readings since the AAII Sentiment Survey started in July 1987. This week’s bearish sentiment reading ranks among the 90 highest readings in the survey’s history. Twenty of those 90 bearish sentiment readings have registered since the start of 2022. AAII added that historically, the S&P 500 index has realized above-average and above-median returns in the six- and 12-month periods following unusually low readings for bullish sentiment and the bull-bear spread.
Similarly, the benchmark index has gone on to realize
above-average and above-median returns during the six- and
12-month periods following unusually high readings for bearish
sentiment.
(Terence Gabriel)
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FRIDAY DATA: THE PAIN AND DRAIN IS MAINLY DUE TO PLANES (1054 EDT/1454 GMT) A data duet on Friday focused on U.S. business activity mostly surprised to the upside, if you can look past plunging new orders for aircraft.
New orders for long-lasting, U.S.-made goods unexpectedly dropped by 1% in February, extending January's downwardly revised 5% slide. Analysts expected the Commerce Department's durable goods report - which covers everything from air fryers to airliners - to show a 0.6% gain. Digging beneath the headline print, 6.6% and 11.1% respective drops in commercial and defense aircraft orders jump out, but otherwise the declines were wide spread, with appliances one of the few categories to register gains, rising 1%.
Core capital goods - which excludes defense and aircraft and is considered a barometer of U.S. business capex plans - surprised in the other direction, ticking up 0.2% on the shoulders of the prior month's diminished 0.3% gain. Consensus called for the value of corecap new orders to show no monthly change. "The small rise in core capital goods orders does not change the grim outlook," writes Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics. "Survey-based measures of capital spending intentions briefly stabilised at the end of last year, but have since plunged to new lows, pointing to a steep decline in core capital goods order volumes in the months ahead."
Separately, S&P Global unveiled its advance "flash" purchasing managers' indexes (PMI) for the manufacturing and services sectors, and both landed north of economist forecasts. Contraction eased on the manufacturing side , rising two points to 49.3, while services activity expanded at an accelerated pace, rising 3.2 points to 53.8. A composite of the two gained 3.2 points to 53.3. The number 50 is the magic PMI dividing line - a reading below that level indicates monthly contraction, above it, expansion. "March has so far witnessed an encouraging resurgence of economic growth, with the business surveys indicating an acceleration of output to the fastest since May of last year," says Chris Williamson, chief business economist at S&P Global. "The upturn is uneven, however, being driven largely by the service sector." "It will be important to assess the resilience of this demand in the face of the recent tightening of interest rates and the uncertainty caused by the banking sector stress," Williamson adds.
Wall Street is red, but off earlier lows in mid-morning trading, with larger-cap banking stocks and the broader financials index , dragged lower by ongoing liquidity fears in the sector.
(Stephen Culp)
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U.S. STOCKS FALL WITH BANKS ON THE BACK FOOT (1001 EDT/1401 GMT) Wall Street's main indexes are lower on Friday as concerns over the banking sector's health sapped the appetite for financial stocks. Indeed, sharp losses in European bank stocks cast a pall over premarket trading, which has carried over into the regular U.S. trading hours. U.S. shares of Deutsche Bank are off more than 6% after the bank's credit default swaps rose to a four-year high. With this, U.S. bank indexes are once again under pressure. The KBW regional bank index is seeing fresh lows back to December 2020, while the S&P 500 banks index has hit its lowest levels since November 2020. Of note, however, the main U.S. indexes have come up off their very early session lows. Here is a snapshot of where markets stood a little more than 30 minutes into the trading day:
(Terence Gabriel)
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U.S. 10-YEAR TREASURY YIELD HITS A 6-MONTH LOW (0900
EDT/1300 GMT)
U.S. equity index futures are lower on Friday as lingering
concerns over the banking sector's health steered investors away
from financial stocks despite reassurances from authorities.
With this, the U.S. 10-Year Treasury yield has
fallen to a six-month low:
The yield hit a low of 3.2850%, taking out its 3.3210% January trough.
If it ends Friday below 3.3970%, it will score a third-straight weekly loss. And if it ends below roughly 3.50%, it will register its second-straight weekly close below its 40-week moving average. Meanwhile, the yield is on pace for its first quarterly decline since December 2021. Once again, the yield's fortunes turned sour after another significant weekly winning streak came to an end. After spiking to as high as 4.0910% in early March, the yield ended a six-week run of gains. Of note, since the yield's March 2020 record-low, once concluded, pronounced weekly winning streaks have marked some significant highs. This was the case with an eight-week win streak which ended on March 19, 2021, a seven-week run of gains that ended on Oct. 8, 2021, and a 12-week win streak that ended on Oct. 21, 2022. In any event, the yield is now flirting with the support line from December 2021, which now resides around 3.30% on a weekly basis. Ending below this line can suggest potential for a much deeper decline.
Weekly Gann Lines will offer the next support around 3.09% and 2.93% next week. The August 2022 trough was at 2.5160%. The yield will now need to hold the weekly support line, and then reclaim resistance in the 3.46%-3.56% area to suggest pressure is coming off the downside.
(Terence Gabriel)
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FOR FRIDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
