Markets will ‘tumble’ when US consumers start to break: Shah Gilani
Money Map Press chief investment strategist Shah Gilani on the importance of looking at the volatility of particular stocks over market trends.
U.S. stock index futures dropped more than 1% on Wednesday amid concerns about a banking crisis, while investors awaited economic data for more clues on the Federal Reserve's monetary tightening plans.
Fresh worries related to Swiss bank Credit Suisse bruised investor sentiment, with U.S.-listed shares of the bank sliding 21.9% and set to open at a record low, after its largest investor said it could not provide more financial assistance to the lender.
After the collapse of SVB Financial and peer Signature Bank, assurances and emergency measures by U.S. authorities had allayed some worries about the health of the other banks, helping regional lenders stage a rebound in the previous session.
However, regional banks pared early gains in premarket trading on Wednesday, with First Republic Bank down 0.7%. Peers Western Alliance Bancorp and PacWest Bancorp slid 0.4% and 6.0%, respectively.
Big U.S. banks such as JPMorgan Chase & Co, Citigroup and Bank of America Corp fell between 1.2% and 2.3%.
"The latest banking crisis is likely to force the Fed to pause raising rates in March. The Fed will need time to monitor the consequences of the latest banking debacle and set aside for now the fight against inflation," said Peter Cardillo, chief market economist at Spartan Capital Securities.
"The prolonged fight against inflation is in part the cause of the Silicon Valley Bank and Signature bank problems … the aftermath of this situation will lead to increasing uncertainties over the reliability of the U.S. financial substructure."
U.S. Treasury yields fell on Wednesday, as traders' bets of a pause in the Fed's rate hikes in March rose to 40% from 15% earlier in the day.
Wall Street rallied in the previous session after a highly anticipated inflation report showed a slowdown in February consumer prices growth, spurring hopes of a smaller rate hike at the conclusion of the Federal Reserve's meeting on March 22.
Investors are awaiting another inflation report due at 8:30 a.m. ET, which is expected to show a moderation in producer price growth in February both on a monthly and annual basis.
Retail sales data for February is also due at the same time, expected to show a 0.3% contraction year-on-year in February from 3% growth last month.
At 7:04 a.m. ET, Dow e-minis were down 517 points, or 1.61%, S&P 500 e-minis were down 63 points, or 1.61%, and Nasdaq 100 e-minis were down 162 points, or 1.33%.
Shares of Charles Schwab Corp edged 0.6% lower premarket, a day after its chief executive said the bank and brokerage have enough liquidity and are not seeking capital or deals.
(Reporting by Amruta Khandekar and Shubham Batra in Bengaluru; Editing by Dhanya Ann Thoppil and Vinay Dwivedi)
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