US stock futures held onto gains while Treasury yields continued to rise after a February inflation report.
(Bloomberg) — US stock futures held onto gains while Treasury yields continued to rise after a February inflation report.
The yield on the two-year Treasury — the most sensitive to interest rates — climbed about 30 basis points to 4.27%. Plunging rates gripped Wall Street’s attention yesterday, when the yield dropped more than a half-percentage point in the biggest move since the 1980s. The 10-year yield rose to 3.59%, while a gauge of the dollar resumed its decline.
Futures on the S&P 500 and Nasdaq 100 rose as regional banking stocks rallied in premarket trading. First Republic Bank, whose shares tumbled by a record 62% on Monday, jumped more than 20%.
Treasuries have been whipsawed in recent days — with a measure of volatility climbing to the highest since 2009 — and banking shares plunged as the collapse of Silicon Valley Bank and two other US lenders prompted wagers the Federal Reserve will pause its hiking cycle and even cut interest rates to stabilize the financial system.
US CPI data showed prices rose 0.4% in February, meeting economists’ forecast.
“A policy mistake is hands down the biggest risk in the market,” Mary Manning, global portfolio manager for Alphinity Investment Management, said on Bloomberg Television. “Controlling inflation but also addressing the fact there is some instability in the banking system is difficult.”
Europe’s Stoxx 600 equity benchmark advanced after falling the most since December on Monday. A gauge of European bank stocks rebounded, led by Caixabank SA and Barclays Plc. Credit Suisse Group AG slipped after uncovering accounting weaknesses.
Goldman Sachs Group Inc. economists as well as asset managers from the world’s largest actively managed bond fund, Pacific Investment Management Co., said the Fed could take a breather on the policy rate following the collapse of SVB. Nomura Holdings Inc. economists took it one step further, saying the Fed could cut its target rate next week.
The bank selloff “certainly creates a headwind for aggressive Fed action, if any action,” said Gary Schlossberg, a senior economist at Wells Fargo. “But there is that very important data coming out which may not ease concerns over inflation. It means the Fed has even more of a balancing act.”
The S&P 500 closed Monday down 0.2%, after bouncing between gains and losses amid a rout in bank shares while the policy-sensitive Nasdaq climbed 0.8%, the most in over a week. The fallout from SVB’s collapse prompted President Joe Biden to promise stronger regulation of US lenders, while reassuring depositors that their money is safe.
The SVB meltdown has also caused a swift repricing in credit risk. Yield premiums on company debt, which had trended lower for much of this year, have climbed back to levels seen in November, according to a Bloomberg index that includes investment-grade and junk bonds.
Elsewhere in markets, oil extended a decline ahead of the inflation data. Gold slid after rising in the three previous sessions as traders turned to haven assets.
Key events this week:
- China retail sales, industrial production, medium-term lending, surveyed jobless rate, Wednesday
- Eurozone industrial production, Wednesday
- US business inventories, retail sales, PPI, empire manufacturing, Wednesday
- Eurozone rate decision, Thursday
- US housing starts, initial jobless claims, Thursday
- Janet Yellen appears before the Senate Finance Committee, Thursday
- US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.6% as of 8:36 a.m. New York time
- Nasdaq 100 futures rose 0.4%
- Futures on the Dow Jones Industrial Average rose 0.5%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0711
- The British pound fell 0.2% to $1.2163
- The Japanese yen fell 1% to 134.50 per dollar
Cryptocurrencies
- Bitcoin rose 3.3% to $25,025.4
- Ether rose 1.5% to $1,697.61
Bonds
- The yield on 10-year Treasuries advanced four basis points to 3.61%
- Germany’s 10-year yield advanced 14 basis points to 2.40%
- Britain’s 10-year yield advanced 13 basis points to 3.50%
Commodities
- West Texas Intermediate crude fell 2.1% to $73.25 a barrel
- Gold futures fell 0.2% to $1,912.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Sujata Rao and Michael Msika.
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