Futures rise on bets of likely rate hike pause after SVB collapse

FILE PHOTO: A Trader works inside a post on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 7, 2023. REUTERS/Brendan McDermid


(Reuters) – U.S. stock index futures jumped on Monday after authorities stepped in to restore investor confidence after the collapse of Silicon Valley Bank (SVB), while investors wagered a rate hike by Federal Reserve in March was no longer a certainty.

Futures tracking the tech-heavy Nasdaq rose the most among Wall Street peers as U.S. Treasury yields dipped to one-month lows, with some investors now pricing in a pause in the Fed’s rate hikes in March.

The benchmark S&P 500 lost 4.6% last week marking its biggest weekly percentage decline since September, erasing nearly all of its year-to-date gains.

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.

Following a tense weekend of board meetings and emergency funding plans for SVB, banking regulators said Sunday evening that depositors at Silicon Valley Bank, which was shuttered Friday, would have access to their funds Monday.

The bank’s closure had followed sharp interest rate hikes that hurt its startup customers and a failed capital raise attempt by the bank, spurring deposit withdrawals.

Investors now evaluate the possibility of the U.S. central bank holding its interest rate hikes at its next policy meeting on March 21-22, with Goldman Sachs (NYSE:GS)’ analysts no longer expecting a rate hike in light of the recent stress in the banking sector.

Money market bets have also changed dramatically following SVB’s collapse, with the 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.

The projections of a terminal rate have also receded to 5.06% by June from around 5.5% before.

Along with the developments unfolding in the fallout of SVB, investors also await crucial inflation data due later in the week for more clues on Fed’s monetary tightening plans.

At 3:46 a.m. ET, Dow e-minis were up 365 points, or 1.14%, S&P 500 e-minis were up 60.25 points, or 1.56%, and Nasdaq 100 e-minis were up 200.25 points, or 1.69%.


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