By Shubham Batra and Amruta Khandekar (Reuters) -U.S. stock index futures rose on Monday as authorities stepped in to restore investor confidence after the collapse of Silicon Valley Bank (SVB), with some investors betting on a pause in interest rate hikes by the Federal Reserve. Futures tracking the tech-heavy Nasdaq led the gains as U.S. […]
Futures gain on bets of likely rate hike pause after SVB collapse
By Shubham Batra and Amruta Khandekar
(Reuters) -U.S. stock index futures rose on Monday as authorities stepped in to restore investor confidence after the collapse of Silicon Valley Bank (SVB), with some investors betting on a pause in interest rate hikes by the Federal Reserve.
Futures tracking the tech-heavy Nasdaq led the gains as U.S. Treasury yields dipped to one-month lows, but were off session highs.
After a dramatic sequence of events leading to U.S. regulators shutting down SVB Financial, Wall Street’s main indexes fell over 1% on Friday, with the Nasdaq Composite taking the biggest hit.
The benchmark S&P 500 tumbled 4.6% last week to mark its biggest weekly percentage decline since September, erasing nearly all of its year-to-date gains.
Following a tense weekend of board meetings and emergency funding plans, banking regulators said Sunday that depositors at Silicon Valley Bank would have access to their funds Monday.
Money market bets have also changed dramatically, with participants now betting an 80.4% chance of a 25 basis points rate hike in March instead of a 50 bps increase, with the rest expecting a status quo.
“It looks like the 50 basis point move is very likely to be off the cards altogether given the negative economic impact and the effect on sentiment from the SVB fallout,” said Victoria Scholar, head of investment at Interactive investor.
“The Fed could even potentially opt for no change to interest rates whatsoever as the central bank keeps a close eye on the risk of any contagion effects from SVB’s collapse.”
The projections of a terminal rate have also receded to 5.06% by June from around 5.5% earlier.
Goldman Sachs analysts said they no longer expect the Fed to raise rates by 25 basis points at its next policy meeting on March 21-22.
Shares of Signature Bank were halted premarket, while First Republic Bank dropped 56.6% before the bell, as concerns persisted about the risk to regional banks following SVB’s collapse.
Among big U.S. banks JPMorgan Chase & Co rose 0.1%, while Citigroup fell 0.7% before the bell.
SVB’s failure followed sharp interest rate hikes that hurt its startup customers and a failed capital raise attempt by the bank, spurring deposit withdrawals.
Investors also await crucial inflation data due later in the week for more clues on Fed’s monetary tightening plans.
At 5:02 a.m. ET, Dow e-minis were up 82 points, or 0.26%, S&P 500 e-minis were up 21.25 points, or 0.55%, and Nasdaq 100 e-minis were up 90 points, or 0.76%.
Shares of crypto-focused lender Silvergate Capital rose 1.2%, while other crypto stocks such as Coinbase, Marathon Digital and Riot Platforms gained between 5.0% and 7.9%.
(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Dhanya Ann Thoppil and Sriraj Kalluvila)
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