Companies and Markets

Market Snapshot: U.S stocks end modestly higher in choppy trade as investors reassess bank stability, Fed rate path

U.S. stocks were struggling between gains and losses on Thursday afternoon, after clawing back some of the Wednesday’s selloff as investors attempted to shake off concerns about banking-sector stability and the impact of an expected credit crunch.

How stocks are trading
  • The S&P 500

    gained 10 points, or 0.3%, to 3,947.

  • The Dow Jones Industrial Average

    climbed 35 points, or 0.1%, to 32,068.

  • The Nasdaq Composite

    rose by 104 points, or 0.9%, to 11,772.

The Dow fell 530 points on Wednesday as Treasury Secretary Janet Yellen’s remark that her department hadn’t discussed blanket protections for bank deposits appeared to overshadow the Federal Reserve’s latest interest-rate hike.

What’s driving markets

U.S. stocks indexes gave back gains in afternoon trade on Thursday after climbing to session highs in the morning, as investors reassessed the Federal Reserve’s rate path after its interest-rate decisions and Treasury Secretary Janet Yellen’s comments on bank failures.

Stocks gave back gains late Wednesday after Treasury Secretary Janet Yellen said that there was no discussion on insuring all bank deposits. Yellen told a Senate committee that blanket deposit insurance hadn’t been considered or discussed by her department.

However, late Thursday Yellen also said the federal government would take extra steps to stabilize the U.S. banking system if necessary, in prepared remarks for a House hearing. “We have used important tools to act quickly to prevent contagion,” Yellen said. “And they are tools we could use again.”

See: Yellen says U.S. would take ‘additional actions’ on bank system if necessary

The U.S. central bank on Wednesday raised rates by an expected 25 basis points, while its statement said it anticipates “some additional policy firming may be appropriate” to bring inflation to its 2% target. That wording is a departure from previous statements which indicated “ongoing increases” would be appropriate to bring down inflation.

However, Fed Chair Jerome Powell said in a press conference that the process of getting inflation lower still “has a long way to go” and rate cuts are not in their base case for the remainder of 2023.

“Yesterday’s steep market selloff occurred after Powell attempted to walk a narrow path between maintaining bank stability and fighting inflation. In doing so, he struck a cautionary tone that dashed investors’ hopes that he would provide a dovish outlook for monetary policy,” said José Torres, senior economist of Interactive Brokers.

Despite Powell’s hawkish tone, markets rallied on Thursday morning as investors believe the Fed is finished hiking rates and will begin cutting them as soon as July, Torres said.

Meanwhile, Citigroup CEO Jane Fraser pushed back against credit-crisis fears while speaking at the Economic Club of Washington, D.C. on Wednesday.

“This is not a credit crisis. This is a situation where it’s a few banks that have some problems,” Fraser said.

Her comments initially may have had a calming effect on markets, said Rich Farr, chief market strategist at Merion Capital Group, during a phone interview with MarketWatch. He credited her remarks for helping to push U.S. stock futures and Asian markets higher overnight.

However, stocks briefly turned lower in the afternoon trading as shares of regional lender First Republic Bank dropped 6.4%.

Economic data released Thursday showed the number of Americans applying for unemployment benefits last week declined to 191,000, the lowest number in three weeks. New data released Thursday showed new-home sales of 640,000 in February, compared with a revised 633,000 in January.

Outside the U.S., both the Swiss National Bank and Bank of England delivered interest-rate hikes less than 24 hours after the Fed’s.

The Swiss central bank lifted borrowing costs by 50 basis points after local authorities helped put together a hastily arranged deal for UBS Group

to take over scandal-scarred crosstown rival Credit Suisse Group
Credit Suisse shares have fallen by 90% over the past year, according to FactSet.

In the U.K., the Bank of England raised its policy rate by 25 basis points, its 11th consecutive increase.

Stocks in focus
  • Block Inc.

    shares plunged 15.6% on Thursday after U.S. short seller Hindenburg Research touted the company as its latest target Thursday.

  • Shares of First Republic Bank

    traded 6.4% lower as fears of a banking crisis eased.

  • Shares of Coinbase Global

    tumbled 14% after the company revealed it had received a Wells notice from the Securities and Exchange Commission.

  • Netflix Inc.

    was up 7.4%, with shares of the streaming giant heading for their biggest daily gain of the year.

See also: Coinbase’s stock tumbles on SEC warning, while First Republic and Regeneron shares rally, and other stocks on the move

Jamie Chisholm contributed to this article


Business Asia
the authorBusiness Asia

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