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U.S. stock futures on Friday opened marginally lower, with markets appearing to take something of a breather after recent turmoil ahead of a relatively light day in terms of economic data.
The tech-heavy Nasdaq Composite (COMP.IND) was down 0.09% to 11,706.98 points after the opening bell. The benchmark S&P 500 (SP500) was lower by 0.23% to 3,951.35 points, while the blue-chip Dow (DJI) slipped 0.59% to 32,055.42 points.
The bank crisis was still very much in focus. On Thursday, a consortium of major financial names stepped in to rescue First Republic Bank (FRC), which had been facing growing outflow risks as concerned depositors took out their money. Nevertheless, shares of the lender shed in post-market trading after its dividend was suspended.
Markets ended solidly higher on Thursday as regulators and government agencies on both sides of the Atlantic rushed to quell fears about the stability of the global financial system. At home, eleven major banks including JPMorgan (JPM) and Bank of America (BAC) pledged $30B in deposits to beleaguered First Republic (FRC), helping sentiment.
However, billionaire investor Bill Ackman had some words of caution on the First Republic (FRC) saga.
“Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy … The market has responded to this fictional vote of confidence with a 35% after-market decline in FRB stock,” he said on Twitter.
The European Central Bank (ECB) on Thursday hiked rates by 50 basis points, and President Christine Lagarde in her post-policy press conference stressed that the banking sector was currently in a “much, much stronger position” than during the 2008 financial crisis.
The bank crisis and the ECB’s decision appeared to skew expectations firmly towards a 25 basis point hike by the Federal Reserve at its upcoming monetary policy committee meeting.
“Some optimism has returned to markets over the last 24 hours, with bank stocks stabilizing on both sides of the Atlantic and 2yr yields surging back. Even the ECB’s decision to pursue a 50bp hike went without incident, and investors grew in confidence that the Fed would follow up with their own 25bps hike next week, so we’re starting to see a modest change in the mood music,” Deutsche Bank’s Jim Reid said.
“Nevertheless, we shouldn’t get ahead of ourselves, and it’s worth remembering that we’ve already had a temporary period of stability on Tuesday that was then dented by the Credit Suisse worries on Wednesday,” he added.
Turning to the fixed income markets, yields were lower on Friday. The 10-year Treasury yield (US10Y) fell 13 basis points to 3.45%, while the 2-year yield (US2Y) was lower by 10 basis points to 4.03%.
Economic data expected later in the day include latest industrial production data and consumer sentiment figures.