*
PacWest slumps as it looks at strategic options
*
Fed opens door to pause in tightening cycle
*
Megacap, tech stocks rise premarket
*
Futures down: Dow 0.34%, S&P 0.35%, Nasdaq 0.06%
(Updates prices throughout; adds analyst comments in paragraphs
5 and 6)
By Ankika Biswas
May 4 (Reuters) - Wall Street futures dipped as news
that PacWest Bancorp was exploring strategic options deepened
concerns about the health of regional banks, countering optimism
from the Federal Reserve's signal of a likely pause in its
interest rate hikes.
PacWest Bancorp tumbled 34.7% in premarket trading
on Thursday after it confirmed it was exploring strategic
options, including a sale, after shares of the regional lender
and peers got hammered amid fears of a worsening banking crisis.
Regulators seized troubled First Republic Bank and JPMorgan
Chase agreed to buy majority of its assets earlier this
week, marking the largest U.S. bank failure since the 2008
financial crisis.
Shares of other regional lenders such as KeyCorp ,
Valley National Bancorp and Zions Bancorp fell
between 4.2% and 9.1%, while Western Alliance Bancorp dropped 13.4% despite noting that it had not experienced unusual
deposit outflows following the sale of First Republic.
"PacWest is more evidence that the U.S. banking crisis is
not over yet," said Stuart Cole, chief macro economist at Equiti
Capital.
"It (PacWest) does appear that it is struggling, and I would
be very surprised if it was not for the same reasons as those
before it ... the market is circling all these regional U.S.
banks like a vulture, looking which one to pick off next."
The U.S. central bank on Wednesday raised interest rates by
25 basis points to the 5.00%-5.25% range and signaled a pause in
its policy tightening, giving officials time to assess the
recent bank failures, U.S. debt ceiling situation and sticky
inflation.
However, U.S. stocks ended lower on Wednesday after Fed
Chair Jerome Powell said that it was too soon to say with
certainty that the rate-hike cycle was over as inflation remains
the chief concern.
U.S. interest rate futures priced in a pause in tightening
at the Fed's June and July policy meetings, according to the
CME's FedWatch tool, and also factored in a nearly 50% chance of
rate cuts at the September meeting.
Although the end of Fed's market-punishing rate-hike cycle
may be in sight, uncertainty over stock valuations and the
economic outlook are keeping investors on alert for more
turbulence ahead.
Major technology and growth stocks such as Meta Platforms Inc , Microsoft Corp and Alphabet Inc edged up, helped by a fall in U.S. Treasury yields. Investors will also monitor weekly jobless claims for further clues on the state of the labor market, as well as results from Apple Inc after the closing bell. At 07:42 a.m. ET, Dow e-minis were down 113 points, or 0.34%, S&P 500 e-minis were down 14.25 points, or 0.35%, and Nasdaq 100 e-minis were down 7.5 points, or 0.06%. Chip designer Qualcomm Inc slumped 7.7% after third-quarter forecasts missed estimates, while e-commerce platform Etsy Inc gained 3% on beating expectations for quarterly revenue. Paramount Global Inc dropped 14.9% after it missed first-quarter revenue estimates as it added fewer subscribers at its flagship streaming service and advertisers cut back on spending. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Stocks and the Fed ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta)
