Five things you need to know before the market opens on Monday March 13:
1. -- Stocks Move Lower As SVB Collapse Rattles Global Markets
U.S. equity futures were mixed Monday as investors retreated from risk markets amid concerns that the fallout from the collapse of tech start-up lender SVB Financial could spread throughout the global financial sector.
Big U.S. bank stocks, including Citigroup (C), Bank of America (BACXL) and JPMorgan (JPM) were marked notably lower in pre-market trading even after the Treasury's late Sunday move to protect SVB depositors and shore up confidence in the nation's banking system.
The moves reflect concerns that the mechanics of SVB's balance sheet, which held billions in long-term Treasury and agency bonds that were slumping in value as a result of soaring interest rates, could be replicated in smaller institutions around the country, and by extension highlight risky exposures in some of the nation's biggest banks.
That concern was linked in part to the takeover of New York-based Signature Bank, which was closed by state financial regulators late Sunday and whose depositors will also be protected by terms of the SVB rescue. That suggested both the Fed and the Treasury were worried that failure to offer support to other lenders this week would tip more of them into financial stress over the coming days.
The SVB collapse, the biggest U.S. bank failure since 2008, has also pounded rate markets, with traders dialing back bets on near-term hikes from the Federal Reserve to just one, a small 25 basis point increase in March, thanks in part to the stresses in regional bank funding and their impact on broader economic growth.
U.S. Treasury note yields, meanwhile, continue to slide as investors pile into safe-haven assets -- many of which will now be available for generous lending terms at the Fed's newly-created window -- while re-setting growth and inflation forecasts.
Benchmark 2-year note yields were last seen 32 basis points south of their late Friday levels and changing hands at 4.27%, marking the biggest three-day pullback since 1987.
Further up the curve, 10-year notes were down 14 basis points at 3.56% while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, fell 0.56% in overnight trading to 103.987.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500, which closed near the lowest levels of the year on Friday, were indicating a 5 point opening bell gain while those linked to the Dow Jones Industrial Average were looking at a 40 point decline, thanks in part to big bank stock declines. The rate-sensitive Nasdaq is looking at a firmer 75 point gain amid the pullback in Treasury yields.
In overseas markets, Europe's Stoxx 600 fell 2.6% in early Frankfurt trading while Britain's FTSE 100 was marked 2.35% lower in London as officials helped orchestrate the takeover of SVB's U.K. subsidary.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.9% higher into the close of trading as the dollar extended declines while the Nikkei 225 ended 1.11% lower in Tokyo.
2. -- Week Ahead: Inflation, Retail Sales Hurdles Before Fed Rate Decision
Global markets face another crucial hurdle ahead of the Federal Reserve's March policy meeting, slated to begin on March 21, with a key inflation reading later this week.
The February CPI report, expected at 8:30 am Eastern time, highlights a relatively light week for data releases and corporate earnings now that the fourth quarter reporting season is largely complete, with markets now moving cautiously towards the March Fed rate decision.
Economists expect the year-on-year headline reading to ease modestly, to around 6%, with the closely-tracked core inflation tally edging 0.1% lower to 5.5%.
February retail sales figures will follow on Wednesday, with weekly jobless claims and housing starts data expected on Thursday. Industrial production figures are expected on Friday.
On the earnings calendar, FedEx (FDX) will report after the close on Thursday, with Dollar General (DG) updating prior to the start of trading.
3. -- SVB Equity, Bond Investors Wiped Out, Depositors Backstopped
SVB Financial Group (SIVB) depositors, most of them involved in the tech sector, will be able to access their cash Monday after the lender was rescued amid the biggest U.S. bank failure since 2008.
The move follows a joint decision by the Fed, the Treasury, the Federal Deposit Insurance Corporation (FDIC) and the White House to offer a multi-billion guarantee for the deposits held by SVB Financial, which does business as Silicon Valley Bank, following its collapse into administration on Friday.
The coordinated rescue, unveiled late Sunday, will not provide support to either the bond or equity holders of SVB, all of which will be 'wiped outed' as a result of its spectacular failure.
"The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,
the Treasury said. "Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe."
4. -- Regional Bank Stocks Tumbles Despite Fed Lending Support
Regional bank stocks extended declines in pre-market trading Monday even as the Federal Reserve moved late Sunday to prevent the collapse of SVB Financial from seeping into the broader banking system.
The Fed said it will establish a “Bank Term Funding Program” (BTFP) that will allows U.S. banks to borrow billions, at favorable market terms, if the loans are backed by Treasury bonds, high-quality agency debt or mortgage-backed securities.
Those securities will not be subject to the usual discount, or haircut, when used as loan collateral, the Fed said, allowing U.S. banks to get fast cash based on their full par value. Banks are sitting on an estimated $620 billion worth of unrealized losses from Treasury, agency and MBS bonds following the surge in market interest rates that has swamped fixed income portfolios around the world.
"The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress," the Fed said.
First Republic Bank (FRC) said late Sunday it had 'enhanced' its financial position through both Fed liquidity and support from JPMorgan.
Nonetheless, shares in First Republic were marked 46.2% lower in pre-market trading to indicate an opening bell price of $43.26 each. PacWest shares slumped 20% to $9.87 each while Western Alliance Bancorporation was marked 15% lower at $49.37 each.
5. -- Eclectic Hit 'Everything Everywhere All At Once' Dominates Oscars
"Everything Everywhere All at Once", a warm-hearted science fiction film focused on a Chinese American family, dominated last night's 95th Annual Academy Awards ceremony, claiming seven total prizes including Best Picture.
The film's lead, Michelle Yeoh, won Best Actress for her role as Evelyn Quan Wang, a laundromat owner struggling to complete her taxes, by the Academy of Motion Picture Arts and Sciences.
Jamie Lee Curtis, a Hollywood staple since the 1970s, won Best Support Actress for her portrayl of tax inspector Deirdre Beaubeirdre.
Former child start Ke Huy Quan, a Vietnamese immigrant perhaps best-known for his roles in the Raiders of the Lost Ark sequel and Goonies, won Best Supporting Actor as Wang's son Waymond.
Brendan Fraser, meanwhile, collected the night's final main award as Best Actor for his role as the morbidly obese Charlie in "The Whale".
