US stocks rose early Tuesday after efforts by the US and Europe to stabilize the banking system.
The waves of the banking sector crisis follow the next interest rate decision by the US Federal Reserve on Wednesday. His political meeting starts on Tuesday.
When the opening bell rang, the S&P 500 (^GSPC) was up 1%, while futures on the Dow Jones Industrial Average (^DJI) were up 0.9%. Contracts on the tech-heavy Nasdaq Composite (^IXIC) edged up 1%.
Bond yields are rising, “possibly indicating less recessionary momentum from the banking system,” according to JPMorgan’s US Market Intelligence team. Yields on the benchmark 10-year US Treasury bond rose 3.5% on Tuesday morning. At the front end of the yield curve, two-year yields rose to 4.1%.
Meanwhile, the US government is exploring ways to guarantee all bank deposits, an effort that would not require Congress to pass new legislation, Bloomberg reported. Treasury Secretary Janet Yellen said at an event Tuesday morning that the government could secure more deposits for smaller lenders if needed.
The S&P 500 was up nearly 1% at the start of the new week. According to data from Bespoke Investment Group, energy and materials were the top sector performers, each up over 2%. Tech, consumer discretionary and communication services underperformed after last week’s strength.
The main event of the week will be a crucial two-day meeting of the Federal Reserve policymaking body, with central bank officials facing a tough decision on whether to hike interest rates again or take a break amid the turmoil in the banking sector.
Before the Silicon Valley bank fallout, policymakers were poised to hike rates by as much as 50 basis points after a flood of data showed a resilient economy. However, given the crisis in the banking sector, many market participants are forecasting a smaller point increase – or none at all.
“Based on Powell’s recent hawkish move in early March, the market still gives the Fed room for a 25 basis point hike at this upcoming meeting, but will not allow the Fed to get away with further tightening beyond that,” Victor Masotti, director of Repo Trading in Clear Street, wrote in a statement.
The story goes on
WASHINGTON, DC – MARCH 08: Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on Capitol Hill on March 08, 2023 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)
The European Central Bank faced a similar scenario on Thursday. As a result, the ECB hiked interest rates by 50 basis points, saying it remains committed to containing inflation while monitoring the turmoil in the banking sector.
“Our economists expect the Fed to follow the ECB’s lead in raising rates as expected, lifting forward guidance but signaling an ongoing tightening bias,” wrote Jim Reid and colleagues at Deutsche Bank in an early morning note Tuesday.
With the solvency of Credit Suisse (CS) no longer a major issue following the forced marriage between UBS (UBS) and Credit Suisse over the weekend, US regional banks remain in focus. JPMorgan is reportedly in talks with other banks over efforts to stabilize the First Republic (FRC) after last week’s $30 billion deposit lifeline failed to restore confidence. Shares rose early Tuesday after falling 47% on Monday.
Other regional banking stocks to post gains Tuesday morning include PacWest Bancorp (PACW), Zions Bancorporation (ZION), Western Alliance Bancorporation (WAL) and Regions Financial (RF).
Big bank stocks also rallied, including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C).
Here are others trend ticker on Yahoo Finance:
Amazon (AMZN): The company plans to cut its workforce further and lay off 9,000 more employees in the coming weeks, CEO Andy Jassy announced in a memo to employees on Monday. The move comes after 18,000 workers were laid off earlier this year.
Digital World Acquisition Corp. (DWAC): Digital World Acquisition is a SPAC that is expected to merge with former President Donald Trump’s Trump Media & Technology Group. The stock saw volatility after Trump said he expected to be arrested Tuesday for alleged hush money payments in 2016.
Outside of the Fed’s monetary policy meeting, economic reports are due to arrive, including housing data, services and manufacturing activity readings from S&P Global.
The earnings calendar features results from Nike (NKE) and Darden Restaurants (DRI) this week, providing an update on the state of the consumer.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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