US Stock Futures Slightly Higher after Positive Day for Major Averages

Key Takeaways

• Financials get a 2.2% boost due to comeback in banking stocks.
• Bank stocks are on the rise overnight on optimism over market stabilization and lower Fed rate increase.
• Investors could gain insight into economy through upcoming retail sales and producer price index data.

Overview

US stock futures were slightly higher in overnight trading following a positive day for the three major averages.

At 04:44, the blue chip Dow Jones Industrial Average futures contract is trading 32409.00, up 7.00 or +0.02%. The benchmark S&P 500 Index is at 3959.00, up 4.75 or +0.12% and the tech-weighted NASDAQ Composite finished at 12351.25, up 14.25 or +0.12%.

Tuesday’s Recap

During the previous session, the Dow Jones Industrial Average added 336 points to snap a five-day losing streak, the Nasdaq Composite gained 2.14%, and the S&P 500 jumped 1.65%.

The 11 S&P sectors finished in positive territory on Tuesday, led by communication services, which gained 2.75%, while financials got a 2.2% boost, thanks to a comeback in banking stocks as investors bet on the sector’s resilience despite the collapse of Silicon Valley Bank and Signature Bank.

CPI as Expected Ahead of Retail Sales, PPI Reports

In other news, the consumer price index for February came in line with expectations, showing a 0.4% increase from January.

Stocks on the Move After Hours:  Lennar, First Republic, Western Alliance

Shares of Lennar, the homebuilding company, gained about 2% in extended trading following their recent earnings report that beat analysts’ expectations for earnings and revenue. Refinitiv reported that the company posted earnings of $2.06 per share on revenue of $6.49 billion for the quarter.

Regional bank stock, First Republic, saw a 12% increase in shares after the bell, with Western Alliance and KeyCorp also experiencing gains of about 10% and 3.5%, respectively.

Retail stock Guess? lost over 7% after posting disappointing guidance for the first quarter and full year, according to FactSet. Pet food company Freshpet saw shares drop 11% after announcing a $350 million offering of convertible senior notes.

On the other hand, air shipping company Atlas Air Worldwide experienced a 3% increase in shares on news that it has met regulatory requirements to close its acquisition by Rand Parent. The company is affiliated with funds that are managed by affiliates of Apollo Global Management and other parties.

Short-Term Outlook

Investors are optimistic due to the government’s effort to contain the SVB crisis and stabilize the market. Furthermore, the likelihood of a 25 basis-point interest rate increase by the Federal Reserve on March 22 has increased due to economic weakness and banking concerns.

The financial markets have now priced in a 74.5% probability that the central bank will raise the Fed funds target rate by an additional 25 basis points at its March 21-22 policy meeting. A growing minority, 25.5%, is seeing the potential of no rate hike at all.

Part of the stabilization was due to the belief that the Fed might back off from some of the hawkish expectations that followed Chairman Powell’s comments last week.

The general feeling in the market, in my opinion, is that that the Fed could create unintended shocks to the system if they aren’t careful.

Investors will also gain more insight into the state of the economy through retail sales and producer price index data due out before the bell on Wednesday, as the tail-end of earnings season presses on with results from Adobe, Five Below, and Oatly.