Tech Powers Stock Gains With Banks Under Pressure: Markets Wrap

(Bloomberg) -- The stock market shrugged off losses, with traders piling into some of the world’s largest technology companies that are seen by many on Wall Street as a kind of shelter in times of stress and economic uncertainties.

Gains in megacaps like Apple Inc. and Microsoft Corp. put the Nasdaq 100 close to the threshold of a bull market after an almost 20% surge from its December low. In the wake of the banking turmoil that has rattled markets and added to recession fears, tech stalwarts have largely outperformed. Banks slumped even after Treasury Secretary Janet Yellen told lawmakers the US would be prepared for further steps to protect deposits if needed.

A gauge of US financial heavyweights like Wells Fargo & Co. and Bank of America Corp. sank to the lowest since November 2020. First Republic Bank tumbled 6% while PacWest Bancorp closed at a record low.

Banks reduced their borrowings only slightly from two Federal Reserve backstop facilities in the most recent week, a sign that institutions are taking advantage of the central bank’s liquidity in the wake of turmoil. US institutions had a combined $163.9 billion in outstanding borrowings in the week through March 22, compared with $164.8 billion the previous week, according to Fed data.

Wild Moves

Short-dated Treasuries were rocked by outsized moves for an 11th-straight trading day as investors pessimistic about the economic outlook cemented their view that the Fed will need to slash interest rates later this year. The two-year Treasury yield fell as much as 18 basis points on the day to 3.75%, having earlier been up close to 7 basis points, marking yet another day with an intraday range of more than 20 basis points.

“The push-and-pull between financial market stability and inflation that is receding more slowly than anyone would prefer will further complicate an already significant challenge for the Fed, increasing the risk of a policy misstep and keeping the door open for a potential recession on the horizon,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

In other corporate news, Block Inc. said it will explore legal action against Hindenburg Research after the short seller issued a report alleging the payments company facilitated fraudsters. The shares plunged 15%.

Now hedge funds couldn’t have picked a worse time to turn bullish on the dollar.

After betting against the greenback for 13 straight weeks, speculators flipped to a net long position in the week ended March 14, according to data from the Commodity Futures Trading Commission. The shift came days just before the Fed tempered its language around how much additional policy tightening might be needed, sending the dollar sliding.

A gauge of the greenback fell for a sixth straight session — its longest losing streak since April 2021.

On the economic front, applications for US unemployment benefits unexpectedly eased for a second week, underscoring a still-tight job market in which employers are reluctant to reduce headcount. Sales of new homes unexpectedly rose in February after a downward revision to the prior month, suggesting the housing market is beginning to stabilize after a tumultuous year.

Elsewhere, the Bank of England pushed ahead with another interest rate increase despite turmoil in the banking sector, predicting the UK economy will avoid a recession for now and that inflation remains a risk. The pound rose, and investors priced in more certainty of at least one more rate hike later this year.

Read: EU Regulators to Rethink Liquidity After Credit Suisse Unravels

Key events this week:

• Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
• US durable goods, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.3%
• The Dow Jones Industrial Average rose 0.2%
• The MSCI World index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro fell 0.1% to $1.0841
• The British pound rose 0.2% to $1.2290
• The Japanese yen rose 0.7% to 130.54 per dollar

Cryptocurrencies

• Bitcoin rose 3.5% to $28,360.29
• Ether rose 4.8% to $1,821.05

Bonds

• The yield on 10-year Treasuries declined six basis points to 3.38%
• Germany’s 10-year yield declined 13 basis points to 2.20%
• Britain’s 10-year yield declined nine basis points to 3.36%

Commodities

• West Texas Intermediate crude fell 2.3% to $69.25 a barrel
• Gold futures rose 2.6% to $2,018.70 an ounce

This story was produced with the assistance of Bloomberg Automation.

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