The bankruptcies of SVB Financial and Signature Bank have awakened old fears and the efforts of American authorities to put out the fire have not been entirely successful, even though they have been quick and efficient. The banking sector fell sharply again yesterday, with worrying drops in second-tier banks: -25% for Zions, -27% for Keycorp and Comerica and -62% for First Republic, the new weak link in the sector. I would like to remind you that the above-mentioned companies are not necessarily in trouble, but that they are caught in a storm that could bring them to their knees. It is due to panic, which supplants rational behavior and can lead to catastrophic results. The SVB shockwave has evaporated $465 billion in bank valuations worldwide, according to Bloomberg. To give you an idea, that's almost the GDP of Austria or the market value of Meta Platforms.

The weird thing about all this is that Wall Street held up pretty well yesterday. Sure, the Dow Jones and the S&P500 were down a bit, having already lost quite a bit of ground over the previous two sessions. But the Nasdaq 100 recovered 0.8%. The index benefited from the absence of banking stocks in its composition - obviously that helps - but also from the postponement of investors on health stocks, more defensive, and on some large tech stocks. Investing in Apple rather than First Republic seems to make sense at the moment. The third element that has supported the U.S. market is the prospect that the Fed will not continue to raise rates. There is even speculation that the Fed will cut rates.

On that front, the situation is still quite confusing and even more so since the release of February's inflation figures earlier this morning.

The Consumer Price Index (CPI) gained 0.4% after rising 0.5% in January, the Labor Department said. It rose 6.4% in the 12 months through January. Core CPI without food and energy prices climbed 0.5% after rising 0.4% in January. This is above expectations of a 0.4% gain in a Reuters poll of economists.

Overall, inflation is going the way that the Fed expected, and this shows that rates hike are working. Markets reacted well, but whether this will lead the Fed to cut rates is another story.

In any case, Wall Street's main indexes opened higher, with the Dow Jones up 0.74%, the S&P 500 up 0.99%, while the Nasdaq 100 was up 1.2%.

 

Economic highlights of the day:

February inflation figures in the US are today’s main event. All the agenda is here. 

The dollar is slightly down to EUR 0.9314 and GBP 0.8200. The ounce of gold has broken through the USD 1900 level. Oil is suffering, with North Sea Brent crude at USD 78.88 a barrel and US WTI light crude at USD 72.95. The yield on 10-year US debt drops to 3.57%. Bitcoin jumps to around 26,000 dollars.

 

In corporate news:

* First Republic Bank rebounded 17.4% in premarket trading on the heels of statements by executive chairman Jim Herbert that the regional bank is able to meet cash withdrawal demands with new funding from JPMorgan Chase.

* Apollo and Blackstone expressed interest in a portfolio of loans held by U.S. bank Silicon Valley Bank (SVB), which was closed Friday by California authorities, Bloomberg News reported Tuesday.

* Cvent Holding - Blackstone will buy the meeting planner in a deal worth $4.6 billion.

* Univar announced Tuesday it will be bought by Apollo Global Management in a deal that values the specialty chemical distributor at $8.1 billion, including debt. The stock is up nearly 14% in premarket trading.

* Wall Street-listed Chinese groups Alibaba, JD.Com and Baidu are each down about 2% in premarket trading amid fears of contagion from the SVB collapse.

* Uber Technologies and Lyft are up 7.1% and 6.4% respectively in premarket trading after a California appeals court ruled that Proposition 22, which requires VTC services to treat drivers as employees and not self-employed, is unconstitutional.

* United Airlines fell 6% in premarket trading after the airline issued an unexpected loss forecast for the current quarter on Monday, citing a drop in demand.

* Buzzfeed plunged 11.7% in after-hours trading as the online media group announced Monday night that most of its cash or cash equivalents are held by SVB bank.

 

Analyst recommendations:

  • AmeriSourceBergen: Baptista Research initiated coverage with a recommendation of buy. PT set to $172.
  • Dick's Sporting Goods: Jefferies initiated coverage with a recommendation of hold. PT set to $155.
  • Estee Lauder: Cowen initiated coverage with a recommendation of outperform. PT set to $280.
  • FMC Corp: Baptista Research initiated coverage  with a recommendation of hold. PT set to $132.40.
  • Hancock Whitney: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 26% to $50.
  • Hibbett: Jefferies initiated coverage with a recommendation of hold. PT set to $69.
  • IMI Plc: Jefferies remains Buy with a price target raised to GBp 1,870 from GBp 1,765.
  • Match Group: Barclays upgrades to overweight from equal-weight. PT up 49% to $52.
  • Parker-Hannifin: Baptista Research initiated coverage with a recommendation of hold. PT set to $379.
  • RH: Jefferies downgrades to hold from buy. PT up 17% to $298.
  • Roku: Wolfe Research upgrades to peerperform from underperform.
  • Seagen: BMO Capital Markets downgrades to market perform from outperform. PT up 16% to $229.
  • Unum: Keefe, Bruyette & Woods upgrades to outperform from market perform. PT up 42% to $52.