4:05pm: Wall Street stays green
News of a potential bailout package for First Republic Bank sent stocks higher on Wednesday.
At the close, all three major indices were in positive territory, with the Nasdaq leading the way at 11,717 points for a 2.5% gain, while the S&P 500 saw a 1.8% recovery to close at 3,960 and the Dow gaining 1.2% at 32,247 points.
Now investors are wondering if the ECB rate decision today will lay the groundwork for the Fed to do something similar.
“In a week that has seen traders struggle with the concept of whether to buy the dollar for its haven role, or sell it on the premise of a more dovish Fed, today has highlighted the potential for a similarly hawkish take from Powell next Wednesday," IG's Josh Mahoney wrote.
"Markets are currently pricing in a 79% chance that the Fed will hike by 25-basis points, with pre-meeting volatility likely to further impact those expectations. Nonetheless, what this week has shown us is just how detrimental higher interest rates have been to a sector which many believed were desperate for such a move. The pressure is on to cut rates as soon as possible, but the task for now is to stabilise things to allow for further tightening in a bid to drive down inflation first.”
12.05pm: Big banks could be set to rescue First Republic Bank
US stocks advanced in noon trading after the Wall Street Journal reported that big banks including JPMorgan Chase and Morgan Stanley were in talks for a possible capital injection into First Republic Bank.
At midday, the Dow gained 201 points to 32,075, while the S&P 500 added 48 points at 3,940 and the tech-heavy Nasdaq rose 222 points to 11,656.
“What’s also similar to ’08 is the hunting in the market for who’s the most weak next,” Morgan Stanley Wealth Management CEO Greg Fleming said.
“And the proxy’s been uninsured deposits,” he added.
Notable movers included shares of Foot Locker Inc, which climbed nearly 4% after Telsey Advisory Group upgraded the stock to ‘Outperform’ from ‘Market Perform’.
9:45am: First Republic down big once again
Shortly after the opening bell Thursday, the Dow was down 167 points, 0.6%, to 31,688, the Nasdaq Composite fell 16 points, 0.1%, to 11,418 and the S&P 500 lost 13 points, 0.3%, to 3,879.
The regional banking sector continues to take hits. First Republic Bank stock was down nearly 30% early Thursday after already taking major losses earlier in the week.
Credit Suisse, which announced last night that it would borrow as much as $54 billion from the Swiss National Bank, is up 3%.
Investors are fearful of which banks might be weak links in the wake of the Silicon Valley Bank collapse. That feels familiar, said Greg Fleming, CEO of Rockefeller Capital Management.
“What’s also similar to ’08 is the hunting in the market for who’s the most weak next,” Fleming said on CNBC’s “Squawk Box.” “And the proxy’s been uninsured deposits.”
7:30am: Struggling for direction
Wall Street is expected to open mostly lower as investors remain on edge after Credit Suisse went cap in hand to the Swiss central bank for a loan, reigniting fears of a sector-wide crisis similar to that of 2008/2009.
Futures for the Dow Jones Industrial Average (DJIA) declined 0.5% in Thursday pre-market trading and those for the broader S&P 500 index fell 0.4%, but contracts for the Nasdaq-100 bucked the trend with a 0.1% gain.
Credit Suisse said it was taking up the Swiss National Bank’s pledge of support with a $54 billion loan to support its balance sheet. The move follows the collapse of US banks Silicon Valley Bank and Signature Bank earlier this week.
The tech-heavy Nasdaq Composite saw a slight recovery by the closing bell on Wednesday to finish 6 points higher at 11,434. But the DJIA and the S&P 500 both ended under water, losing 0.9% and 0.7% respectively to finish at 31,875 and 3,892.
"Global equity markets are definitely struggling to find direction as the first quarter of 2023 draws to a close, with the only certainty right now seeming to be elevated levels of volatility," commented James Hughes, chief market analyst at Scope Markets. "Wall Street’s losses on Wednesday were mitigated in part by a late session rally, but futures prices are flitting around making opening direction difficult to call.
The next test will be the European Central Bank’s rate decision later today, where AJ Bell investment director Russ Mould said it may opt for a 25-basis point hike rather a more aggressive 50-basis point hike given the nervousness around the banking system.
“If it went down this path, it would in effect be doing a dress rehearsal for the Federal Reserve next week,” he added. “The prospect of a 50-basis point hike from the Fed now seems unthinkable. Equally, being overly cautious might send another worrying message."
“Given the strength of the US jobs market and sticky inflation, the US central bank would have to show extreme fear at the financial system if it was to leave rates untouched or even cut them," Mould said. "Instead, a 25-basis point hike would be its way of biding time to assess the situation but also stay on the path to taming inflation.”