Nervous start to the session for Wall Street at the end of a tumultuous week and in a potentially volatile day on the occasion of the simultaneous expiration of options and futures on indices and options.
After about an hour of trading, the S&P 500 is down 0.8%, the Dow Jones is down 1.1% and the Nasdaq is down 0.4%. First Republic Bank still under pressure (-20%), despite the intervention of 11 banks, including Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley, to lock down the regional bank by depositing $30 with it billion. FedEx bucked the trend (+8%) after raising profit prospects.
The turbulence of the last few days in the financial sector has depressed investor sentiment, worried about a possible economic recession. US banks borrowed a total of $164.8 billion in the past week, signaling an escalation in funding difficulties following the failure of Silicon Valley Bank.
Nonetheless, the Fed appears to be heading towards a rate hike (by 25 basis points) at next week’s meeting, as pointed out by Blackrock. JPMorgan, on the other hand, foresees a truce that could bring a “sigh of relief” to the markets, as “financial stability is more important than inflation and the Fed would struggle to transmit monetary policy through a failing banking system”.
Bond yields down, with the two-year down by 14 bp to 4.02% and the ten-year (-15 bp) to 3.43%. Dollar down against the other major currencies, with the EUR/USD exchange rate slightly up to 1.063 and the dollar/yen down to 132.1. Among raw materials, oil is once again losing ground, with Brent at 72.6 dollars and WTI at 66.3 dollars.