S&P 500 Index Set to Rise as Banking Contagion Fears Ease

Key Takeaways

• US stock indexes expected to build on gains from previous session
• SPDR S&P Regional Banking ETF, Western Alliance and PacWest see gains
• JPMorgan upgrades Philip Morris, Walmart receives outperform rating

Overview

The major US stock indexes are called higher based on the pre-market futures trade on Thursday. Investors expect the S&P 500 Index to build on the sharp gains from the previous session, as traders bet the regional banking crisis has stabilized.

At 13:00 GMT, the blue chip Dow Jones futures contract is trading 33110.00, up 207.00 or +0.63%. Benchmark S&P 500 futures are at 4083.50, up 26.00 or +0.64% and the tech-weighted NASDAQ Composite is trading 13049.75, up 84.75 or +0.65%.

Investor Optimism Drives Pre-Market Rally for Regional Banking ETF and Western Alliance, PacWest Shares

The SPDR S&P Regional Banking ETF (KRE) rose by almost 1% in premarket trading, with Western Alliance and PacWest also seeing gains of 3% and 2% respectively.

This is attributed to investors’ optimism that the central bank has contained any further banking contagion, leading to a 7% increase in KRE from its March 23 crisis low.

The CBOE Volatility Index, a measure of expected turbulence in the S&P 500 over the next 30 days, has also dropped from 30 to 19 in recent weeks, indicating further market stability.

According to Thomas Martin, senior portfolio manager at Globalt Investments, Wall Street is weighing various factors including corporate earnings, interest rates, potential recession, and the state of the banks.

JPMorgan Upgrades Philip Morris, Walmart Receives Outperform Rating from Evercore ISI, while Charles Schwab Faces Downgrade

Philip Morris was upgraded by JPMorgan analyst Jared Dinges from neutral to overweight due to recent stock de-rating and the company’s potential for double-digit compound annual growth.

Dinges noted the company’s diversified risk, the highly successful launch of its Heated Tobacco brand, and meaningful cash flow support as reasons for the upgrade. Shares rose over 1% in premarket trading.

On the other hand, Charles Schwab was downgraded by analyst Michael Cyprys from overweight to equal weight due to an uncertain earnings outlook, resulting in limited visibility on multiple variables. Shares dipped over 1% in premarket trading.

Finally, Walmart received an outperform rating from Evercore ISI analyst Greg Melich due to improving traffic trends, making it an ideal time to buy the retailer.

Melich stated that Walmart is poised to regain share as consumers across the demographic spectrum make wallet allocation choices after several years of record nominal retail spending. Shares gained over 1% before the bell.

Short-Term Outlook

Based on the pre-market futures trade on Thursday, the news appears to be bullish as investors expect the major US stock indexes to build on the sharp gains from the previous session.

The SPDR S&P Regional Banking ETF, Western Alliance, and PacWest also saw gains, indicating further market stability.

Overall, the outlook seems positive with investors optimistic that the regional banking crisis has stabilized.