The US stock market rally attempt experienced a strong session on Thursday with the Nasdaq leading the way, fuelled by big caps such as Apple, Microsoft, Advanced Micro Devices, and Nvidia. To the delight of investors, JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley initiated a $30 billion investment into California-based First Republic Bank (FRC), setting off a favorable reaction among market watchers. This article explores the impact of the aforementioned factors and analyzes how the market may perform on Friday, March 17th, 2023.
FedEx Soars Past Buy Point
FedEx earnings topped fiscal Q3 views but missed on revenue, causing its stock to surge by 11% to $227, signaling a breakout. The shipping giant also raised full-year EPS guidance. Investors could use a move above the March 9th intraday high of $213.31 as an early entry, given that FedEx stock is working on a $217.48 flat-base buy point.
Regional Banks Gain from Deposit Infusion
First Republic Bank (FRC) was up 10.3% to $34.38, with several other regional banks moving higher as well, including Western Alliance Bancorp and Pacific Western Bank. FRC stock had been down over 36% intraday and up as much as 28% and is currently off more than 70% this month. However, it fell 3% early Friday after First Republic suspended its dividend, though it is still well off overnight lows.
Bank Deposits and Backstops
Banks tapped $164.8 billion from the central bank's backstops in the week ended March 15, with a record $152.85 billion coming from the discount window, up from $4.58 billion in the prior week. This is likely mostly from the FDIC-run successors to SVB Financial and Signature Bank. Banks also borrowed $11.9 billion from the Bank Term Funding Program. Under that new Fed facility, banks can take out one-year loans under favorable terms in exchange for quality collateral.
Stock Market Rally Analysis
The stock market rally attempt enjoyed a broad-based, robust advance on Thursday, fueled by optimism that bank woes will be contained. The Nasdaq composite rebounded strongly from a convergence of all the major averages, breaking a trendline from the early February highs. The Nasdaq 100, which includes Apple stock and Microsoft, decisively broke its trendline. The S&P 500 index moved back above its 200-day line, and breaking above the 50-day line would likely mean the S&P 500 would clear its own trendline. However, volume fell versus Wednesday, indicating that investors remained cautious. Thus, it is still a market rally attempt, not a confirmed uptrend.
Conclusion
Early Friday saw the Dow Jones, S&P 500 and Nasdaq futures remain largely unaltered, but the 10-year Treasury yield dropped to 3.55%, a dip of 3 basis points, and the two-year yield rose 2 basis points to 4.15%. Crude oil futures climbed almost 2%, and copper prices rose 2%. While overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session, the positive momentum generated on Thursday, combined with the optimistic bank news, may help the market continue its upward trend on Friday, March 17th, 2023.
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