Tues. 8:40 a.m.: Wall Street quiet as stability appears to return for banks
U.S. futures are flat in light trading Tuesday as anxiety over the strength of the global banking sector, triggered by the collapse of Silicon Valley Bank, eased.
Futures for the Dow Jones Industrial Average and the S&P 500 shifted between small gains and losses before the bell.
Markets have been in turmoil following Silicon Valley Bank’s collapse, the second-largest U.S. bank failure in history, earlier this month, and then the third-largest failure, by New York-based Signature Bank.
The Senate Banking Committee will hold the first formal congressional hearing Tuesday on the failures of Silicon Valley Bank and New York-based Signature Bank and the shortcomings of supervision and regulation, by the Fed and other agencies, that preceded them. The committee will also likely question Barr and other officials about the government’s response, including its emergency decision to insure all the deposits at both banks, even as the vast majority exceeded the $250,000 limit.
The fear is that a weakened banking sector will lead to a pullback in lending to small and midsized businesses across the country. That in turn could lead to less hiring, less growth and a higher risk of a recession. Many economists were already expecting an economic downturn before all the struggles for banks.
The Federal Reserve has pulled its key overnight rate to a range of 4.75% to 5%, up from virtually zero at the start of last year. It indicated last week that the troubles in the banking system could end up acting like rate hikes on their own, by slowing lending.
Huge, quick swings in expectations for the Fed have caused historic-sized moves in the bond market.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.56% from 3.37% late Friday. It was above 4% earlier this month. The yield on the 2-year Treasury rose to 4.01% from 3.77% late Friday.
France’s CAC 40 added 0.2% at midday, as did Germany’s DAX. Britain’s FTSE 100 inched up 0.1%.
Asian shares finished higher. Japan’s benchmark Nikkei 225 edged up 0.2% to finish at 27,518.25. Australia’s S&P/ASX 200 jumped 1.0% to 7,034.10. South Korea’s Kospi added 1.1% to 2,434.94. Hong Kong’s Hang Seng rose 0.9% to 19,751.94, while the Shanghai Composite slipped 0.2% to 3,245.38.
“Asian equities were positive on Tuesday, lifted by mostly higher major indices in the previous session. Receding fears surrounding the banking crisis and surging oil prices led to solid risk-taking flows,” Anderson Alves of ActivTrades said in a report.
In energy trading, benchmark U.S. crude added 32 cents to $73.13 a barrel in electronic trading on the New York Mercantile Exchange. It gained $3.55 to $72.81 per barrel on Monday.
Brent crude, the international standard, rose 23 cents to $77.99 a barrel.
In currency trading, the U.S. dollar fell to 131.17 Japanese yen from 131.56 yen. The euro cost $1.0823, up from $1.0804.
On Monday, the S&P 500 eked out a 0.2% gain led by bank and energy stocks. The Dow industrials rose 0.6%, while the Nasdaq composite fell 0.5%, reflecting losses in Google parent Alphabet and other tech companies.