To The Moon

Market Recap | Stocks Edge Higher as Pressure on Banks Continues

The selloff in U.S. bank stocks paused Friday, though continued pressure on global markets suggested that strains in the financial system have yet to be resolved.

Upheaval that began with the collapse of Silicon Valley Bank and two other U.S. lenders earlier this month spread to Europe with Credit Suisse's forced sale to UBS last weekend. On Friday, Deutsche Bank's Frankfurt-listed shares tumbled 8.5% as investors looked for the next trouble spot.

All three major U.S. indexes were still on track for weekly gains. In Friday afternoon trading $S&P 500(.SPX)$ rose 0.6%. $DJIA(.DJI)$  added 0.4%, and $NASDAQ(.IXIC)$ advanced 0.3%.

Traders moved money into safe havens, including utility stocks, which were the top performing segment of the S&P 500 stock index, up 3.1%, and gold futures, which rose above $2,000 a troy ounce this week for the first time since March 2022, when the Federal Reserve began raising interest rates to fight inflation.

The climb in gold prices suggests belief among traders that the Fed is finished raising interest rates, said Christopher Wood, global head of equity strategy at Jefferies.

"The reason for this conviction is the assumption that credit conditions will tighten in the context of recent banking-related stresses," he said.

Though major European banks lack some of the vulnerabilities of regional U.S. lenders, investors are nervous about issues such as funding costs, following the unexpected wipeout of riskier Credit Suisse bonds.

Financial stocks in the S&P 500 slipped 0.1%, but recovered most of their losses from earlier in the day. $JPMorgan Chase(JPM)$ declined 1.5%, $Citigroup(C.US)$ was off 0.8%, and $Morgan Stanley(MS.US)$ dropped 2.1%. Some regional banks continued to recover from the recent selloff, including $KeyCorp(KEY.US)$, $Citizens Financial(CFG.US)$ and $Zions Bancorp(ZION.US)$, each up more than 2.9%.

They were outpaced in the S&P 500 by Activision Blizzard, which gained 5.9% after the U.K.'s antitrust regulators said it has narrowed its probe of Microsoft Corp.'s planned $75 billion takeover of the video-game maker, bringing the deal closer to approval. $Microsoft(MSFT)$  shares traded 1% higher.

Michael Bell, global market strategist at J.P. Morgan Asset Management, said investors were trying to determine to "what extent do concerns around the banking system bleed to even further credit-condition tightening."

That would determine the outlook for stock markets, Mr. Bell said. He said the risk of a recession had risen in both Europe and the U.S., and that a downturn has historically weighed on stocks. Still, he added that central banks and other authorities are likely to respond forcefully to any further stress in the banking industry.

Investors sought shelter in U.S. government debt. That pushed the yield on 10-year Treasurys down to 3.379%. Two-year yields fell to 3.777% from 3.808%.

Traders doubled down on bets that the Federal Reserve will keep interest rates on hold at its May meeting. The probability implied by interest-rate futures stood at 99%, compared with 73% Thursday, according to CME Group.

Meanwhile, oil prices retreated. U.S. benchmark futures fell 1% to $69.26 a barrel.

@TigerStars  @Daily_Discussion  @CaptainTiger  @MillionaireTiger  @Tiger_chat