Five things you need to know before the market opens on Friday March 24:
1. -- Stock Futures Slump As Bank Crisis Spreads Into Europe
U.S. equity futures edged lower Friday, while Treasury bond yields extended their recent slump into a third consecutive session, as investors continue to bet on a near-term pause in Fed rate hikes while growing increasingly concerned over the impact of a banking crisis that looks to have spread into European markets.
Treasury Secretary Janet Yellen, who had rattled bank stock investors and the wider market Wednesday when she told Senate lawmakers there were no plans for a "blanket" guarantee of U.S. deposits, struck a more balanced tone late Thursday while appearing be a House subcommittee panel.
"We have used important tools to act quickly to prevent contagion. And they are tools we could use again," Yellen said. "The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted."
Her remarks helped U.S stocks build modest gains into the close of trading, with the S&P 500 rising 0.3% to reclaim levels last seen prior to the collapse of SVB Financial on March 10.
Market momentum, however, has been difficult to gather, given both the impact on credit growth and economic activity as a result of the banking crisis, and the stubbornly high inflation rate that continues to erode future value in financial markets.
That said, traders appear to be betting that the former pressures are likely to overtake inflation concerns, with the CME Group's FedWatch indicating a 75% chance that the central bank pauses its rate hiking cycle at the next policy meeting in May.
In the bond market, benchmark 2-year Treasury note yields were were marked 20 basis points lower in overnight trading at 3.607% while 10-year notes were pegged at 3.298%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.66% higher at 103.206 in safe-haven trading.
On Wall Street, stocks look set for a weaker open ahead of durable goods orders at 8:30 am Eastern time and PMI activity data for the month of March 45 minutes later.
Futures tied to the S&P 500 are priced for a 29 point decline while those linked to the Dow Jones Industrial Average are indicating a 270 point pullback. Contracts tied to the Nasdaq are indicating a more modest 47 point dip as tech stocks get support from the slump in Treasury yields.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.55% lower into the close of trading, while Japan's Nikkei 225 fell 0.13% for its second consecutive session decline.
In Europe, the Stoxx 600 was marked 1.56% lower in early Frankfurt trading, with bank stocks leading the day's declines, while the FTSE 100 fell 2.05% in London.
2. -- Banks Borrow $164 Billion From Fed Amid Acute Funding Stress
U.S. banks trimmed their borrowing from the Federal Reserve's various lending programs this week, but the levels of support remain elevated amid an unsteady calm in the country's banking sector crisis.
Banks borrowing $110.2 billion from the Fed's main discount window over the seven-day period ending on Wednesday, according to Fed data, down $42.7 billion from the record amount drawn over the prior timeframe.
Borrowing from the Fed's new Bank Term Funding Program, which allows banks to exchange high-quality assets for one-year loans, rose nearly fourfold to $53.7 billion.
Action in the Fed's latest liquidity effort, a daily offering of U.S. dollar swap lines to foreign central banks, jumped to $60 billion after attracting virtually no interest over its first few days in effect.
The elevated borrowing suggests stresses remain evident in the U.S. banking system following the collapse of Silicon Valley Bank and Signature Bank earlier this month and the ongoing concerns for deposit and capital flight from smaller regional lenders.
First Republic FRC shares marked 0.72% higher in pre-market trading at $12.62 each. PacWest was up 0.27% and Western Alliance Bancorporation slipped 0.8%.
4. -- Deutsche Bank Shares Tumble As Default Risk Spikes Amid Market Turmoil
Deutsche Bank (DB) shares slumped lower in Frankfurt trading after contracts designed to insure against any default on its debt surged amid concern that the region's second-largest lender will be pulled into the recent market maelstrom.
Credit default swaps on Deutsche Bank debt, which allow an investor to pay a regular premium to insure their debt holdings against default, jumped the most on record Friday as shares extended their slump for a third consecutive session.
Prices on its so-called AT1 bonds, a form of debt used to cushion the bank from potential losses, were also moving sharply lower following last week's decision by Swiss authorities to wipe out AT1 holders in the forced takeover of Credit Suisse by UBS Group.
Deutsche Bank shares were marked 13.25% lower in Frankfurt and changing hands at €8.10 each while its U.S. listed shares were marked 9.6% lower at $8.72 each.
4. -- Block Extends Declines As Group Hits Back At Hindenburg Report
Block Inx (SQ) shares extended declines in pre-market trading following a report from Hindenburg Research that accused the payments group of inflating its user base and facilitating illegal transactions on its platform.
Block hit back at the allegations late Thursday, saying the Hindenburg report was designed to "deceive and confuse investor", adding that it issues frequent disclosure reports and operates in highly-regulated markets.
"Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price," Block said in a statement emailed to TheStreet.
Bloomberg, meanwhile, reported that Cathie Wood's Ark Investment Management had bought around 338,000 shares in Block for its three investment funds during yesterday's trading slump, which sent the shares 14.8% lower by the close of trading.
Block shares were marked 5% lower in pre-market trading to indicate an opening bell price of $58.83 each.
5. -- TerraUSD Founder Do Kwon Indicted By U.S. Authorities on Fraud Charges
Do Kwon, the founder of Singapore-based Terraform and the architect of the failed stablecoin TerraUSD, was indicated by U.S. authorities on fraud charges following his arrest in Montenegro late Thursday.
Kwon, 31, faces an eight-count indictment unveiled yesterday in the U.S. District Court in Manhattan, with charges including securities fraud, wire fraud and conspiracy.
TerraUSD and its sister coin, Luna, collapsed in spectacular fashion last year, wiping out more than $40 billion in market value and trigger tremors in the cryptocurrency market that ultimately toppled Sam Bankman-Fried's FTX trading platform in the Bahamas.
Kown, a South Korean national, had been evading authorities for several months following the TerraUSA collapse and was eventually stopped by police in the southern European capital of Podgorica travelling with forged passports and falsified documents.
