Nasdaq Advanced 2% On Stable Treasury Yields and Receding Bank Worries

Barry Adams
29 Mar, 2023
New York City

Tech stocks rallied for the second day in a row after the yields on treasury securities held.  

Stocks opened higher after banking crisis worries receded and Treasury yields for short and long term securities traded in a tight range and closed nearly unchanged. 

With easing of bank worries and the Fed's rate pivot scenario dominated trading sentiment. Tech stocks, regional banks and rate sensitive sectors led the gainers on Wednesday's session. 

Michael Barr, vice chairman for supervision Federal Reserve, said financial meltdown at the failed Silicon Valley Bank resulted from poor risk management. 

"The picture that has emerged thus far shows SVB had inadequate risk management and internal controls that struggled to keep pace with the growth of the bank," noted Barr in his prepared remarks to the Committee on Financial Services, U.S. House of Representatives on Wednesday. 

Barr's comments soothed market nerves for now and investors surmised that the U.S. banking system may be able to avoid a wider contagion. 

Tech stocks rallied on Wall Street following the surge in Alibaba Group in Hong Kong. 

SoftBank, the largest stockholder in the Chinese e-commerce giant with a stake of 24%, soared on the Alibaba news. 

In New York, Alphabet Inc, Amazon.com Inc, Meta Platforms and Apple Inc advanced between 1% and 2.5% after worries of rapid rate hikes eased. 

 

Weekly Mortgage Applications Index Rebounded  

Mortgage applications volume increased 2.9% in the week ended March 24, the fourth weekly increase in a row, according to the weekly survey released by the Mortgage Bankers Association on Wednesday. 

“Application activity increased as mortgage rates declined for the third straight week. 

The 30-year fixed rate declined to 6.45%, the lowest level in over a month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

The Refinance Index increased 5% from the previous week and was 61% lower than the same week one year ago. 

The seasonally adjusted Purchase Index increased 2% from one week earlier and the unadjusted index increased 2% compared with the previous week and was 35% lower than the same week a year ago.

 

U.S. Indexes & Yields 

The S&P 500 index increased 1.4% to 4,025.27 and the Nasdaq Composite index increased 1.7% to 11,920.07. 

The yield on 2-year Treasury notes increased 3 basis points to 4.09%, 10-year Treasury notes closed unchanged at 3.57% and 30-year Treasury bonds decreased 1 basis point to 3.78%. 

Crude oil increased 33 cents to $72.86 a barrel and natural gas price edged up 2 cents to $2.17 a thermal unit. 

 

U.S. Movers 

UBS Group AG increased 3.5% to $19.95 after the company recalled former chief executive Sergio Ermotti to manage the recent acquisition of Credit Suisse. 

Ermotti served as chief executive for nine years to October 2020 and is currently Chairman of Swiss Re.

Ermotti will replace current CEO Ralph Hamers on April 6 and Hamers will advise the company during the transition. 

Lululemon Athletica increased 14.4% to $365.05 after the athleisure retailer reported a surge in comparable same store sales in the fourth quarter. 

Revenue in the fourth quarter ending in January increased 30% to $2.8 billion on comparable sales surge of 27%. 

Net income in the quarter dropped to $119.8 million from $434.5 million and diluted earnings per share fell to 94 cents from $3.37 a year ago. 

The company estimated fiscal first quarter 2023 net revenue in the range of $1.890 billion to $1.930 billion, representing growth of  approximately 18%. 

Diluted earnings per share are expected to be in the range of $1.93 to $2.00 for the quarter. 

Micron Technology Inc advanced 6.2% to $63.0 after the semiconductor manufacturer reported smaller-than-anticipated quarterly loss. 

Revenue in the fiscal second quarter ending on March 2 declined to $3.69 billion from $4.09 billion in the prior quarter and $7.79 billion a year ago. 

The company swung to a loss of $2.3 billion from a profit of $2.3 billion and diluted earnings per share was ($2.12) from $2.0 a year ago. 

The company guided revenue in the third quarter of $3.7 billion and diluted loss per share of $1.79. 

“Customer inventories are getting better, and we expect gradual improvements to the industry’s supply-demand balance," said chief executive Sanjay Mehrotra. 

 

European Markets Extended Recent Gains 

European markets rebounded for the second day in a row as investors looked beyond the current banking crisis in Switzerland and the United States. 

UBS rehired its former chief executive, after the Swiss-bank was forced by the Swiss government to takeover Credit Suisse, shoring confidence in bank stocks in the region. 

Market nerves were further soothed after the Federal Reserve Vice Chairman Supervision Michael Barr said the poor risk control and mismanagement and not systemic troubles were behind the recent demise of Silicon Valley Bank.  

Tech stocks were among the leading gainers after Alibaba Group announced a restructuring plan and split the company in six business units. 

The restructuring news lifted tech stocks in Europe, Asia and in New York trading. 

 

Europe Indexes & Yields 

The DAX index increased 1.2% to 15,328.78, the CAC-40 index added 1.4% to 7,186.99 and the FTSE 100 index advanced 1.1% to 7,564.27. 

The yield on 10-year German Bunds increased to 2.82%, French bonds advanced to 2.82%, the UK gilts to 3.46% and Italian bonds to 4.14%. 

The euro inched up to $1.08, the British pound edged higher to $1.23 and the Swiss franc advanced to 91.94 cents. 

Brent crude decreased 14 cents to $78.50 a barrel and the Dutch TTF natural gas prices for immediate month delivery rose 31 cents to $43.06 per MWh. 

 

Europe Movers 

Mercedes Benz Group AG decreased 2.1% to €70.36 after Kuwait Investment Authority plans to reduce its stake in the luxury automaker. 

Kuwait's sovereign wealth fund plans to sell 20 million shares at average price of Є69.27 and raise about Є1.4 billion. 

After the sale, the sovereign fund will still hold about 53 million shares or 4.8% stake in the company. 

Infineon Technologies AG increased 6.9% to €35.88 after the German chipmaker raised its outlook for the fiscal second quarter and full-year 2023. 

Nordex SE advanced 1.3% to €12.78 after the German wind turbine maker won contracts to supply and install 14 wind turbines with a total capacity of 78 MW in Greece. 

Two wind farms with a total of 10 turbines are to be built in Boeotia in Central Greece, while one wind farm with four turbines is to be installed in Achaia in the north-west of the Peloponnese in western Greece.   

After commissioning the three wind farms will produce more than 232 GWh of electricity a year, equivalent to the consumption of 60,000 Greek households, and reducing the emission of around 100,000 tons of CO2 a year. 

Essentra Plc increased 5.4% to 187.0 pence after the components and systems maker launched a stock repurchase program. 

The company said revenue in 2022 increased 12% to £338 million from £302 million and net loss expanded to £31 million from £5 million and loss per share rose to 10.3 pence from 1.6 pence from a year ago. 

The company announced a plan to return £150 million capital to shareholders, consisting of £90 million in special dividend (29.8 pence per share) and £60 million through a stock repurchase plan. 

UBS Group AG increased 3.7% to Sfr 18.40 after the Swiss-bank rehired Sergio Ermotti as chief executive to lead the recent takeover of Credit Suisse. 

Ermotti served as chief executive for nine years to October 2020 and is currently Chairman of reinsurance company Swiss Re. 

Ermotti will replace current CEO Ralph Hamers on April 6 and Hamers will advise the company during the transition, said the company in a press statement.