Stocks Boosted as Bank Stocks Recover

The S&P 500 Index ($SPX) (SPY) closed +0.56% higher on Friday, the Dow Jones Industrials Index ($DOWI) (DIA) closed +0.41% higher, and the Nasdaq 100 Index ($IUXX) (QQQ) closed +0.30% higher.

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Market indices rebounded from early losses and ended slightly higher on Friday. Short covering of bank stock resulted from an unplanned Friday meeting of the Financial Stability Oversight Council (FSOC) organized by Treasury Secretary Yellen. The Federal Reserve, the Federal Deposit Insurance Corporation, and several other regulatory agencies are members of the FSOC, which issued a statement late Friday afternoon stating that "the United States banking system remains sound and resilient despite the fact that some institutions are under stress."

Bank stocks began lower on Friday, weighing on the wider market as investors remained concerned about the banking sector's soundness. Treasury Secretary Yellen shocked the market on Wednesday by saying the US government is not considering "blanket" deposit protection. Ms. Yellen had little success in damage control on Thursday when she stated that the government is prepared to take additional actions to protect bank deposits if necessary.

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European bank stocks fell on Friday after Bloomberg News reported that Credit Suisse Group AG and UBS Group AG were among the institutions under investigation in the United States. The Justice Department is investigating whether financial professionals assisted Russian oligarchs in evading sanctions. UBS Group AG fell more than -3%.

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Fed statistics released late Thursday indicated that the Federal Reserve facility that provides foreign central banks with access to dollar liquidity was tapped for a record $60 billion in the week ending March 22.

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According to Bank of America, EPFR Global data reveal that investors are running to cash to avoid the instability in financial markets, with global cash funds receiving almost $143 billion in inflows in the week ending Wednesday, the highest rise since March 2020. Investors have put more than $300 billion into cash funds in the last four weeks.

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World bond rates are decreasing as a result of the financial crisis. The 10-year T-note yield fell to a 6-and-a-quarter-month low of 3.280% on Friday, but rose from there as equities rebounded, finishing the day down -6.0 basis points at 3.367%. In addition, the 10-year German bund yield plummeted -6.7 basis points to 2.129%, while the 10-year UK gilt yield fell to a 6-week low of 3.132%.

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Friday's economic news from the United States was better-than-expected and supportive of equities, as February capital goods new orders nondefense ex-aircraft surprisingly gained +0.2% m/m, above estimates of a -0.2% m/m fall. In addition, the March S&P manufacturing PMI surprisingly increased by +2.0 to a 5-month high of 49.3, above predictions of a decrease to 47.0.

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St. Louis Fed President Bullard made hawkish comments Friday, saying that financial stability risks may be addressed by new actions to reduce bank stress, while tighter monetary policy could continue to target rising inflation. Bullard also increased his projection for peak interest rates this year from 5.375% to 5.625% "in response to improved economic developments."

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International stock markets closed down on Friday. The Euro Stoxx 50 fell -1.82%. The Shanghai Composite stock index in China fell -0.64%, while the Nikkei Stock Index in Japan fell -0.13%.

Today’s stock mover

Activision Blizzard (ATVI) closed up more than 5% to lead gainers in the S&P 500 and Nasdaq 100 after the UK's Competition and Markets Authority updated its preliminary findings on Microsoft's acquisition of Activision after new evidence showed the buyout would not result in a significant reduction in competition in console gaming in the UK.

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Intuitive Surgical (ISRG) finished up more than 4% after William Blair started coverage with an outperform rating on Thursday.

Bank stocks rebounded from early losses and rose, lifting the overall market. Citizens Financial Group (CFG) closed up more than 4%, while Key Corp (KEY) closed up more than 5%. Zions Bancorp (ZION) and M&T Bank (MTB) also finished up by more than 2%. Also, Regions Financial (RF) and Lincoln National (LNC) finished more than 1% higher.

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Bond rates fell on Friday, which helped utility stocks. American Electric Power (AEP), Evergy (EVRG), CMS Energy (CMS), and DTE Energy (DTE) all closed up more than 4%. Also closing up more than 3% were First Energy (FE), Consolidated Edison (ED), Edison International (EIX), WEC Energy (WEC), CenterPoint Energy (CNP), Duke Energy (DUK), Alliant Energy (LNT), Entergy (ETR), Xcel Energy (XEL), and Eversource Energy (ES).

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Netflix (NFLX) closed up more than 2% as Bank of America anticipates good subscriber trends for the firm as it cracks down on account password sharing.

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Wells Fargo Securities raised First Horizon (FHN) to overweight from the equal weight with a price objective of $25, sending the stock up more than 6%.

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Semiconductor stocks fell on Friday, giving back some of their big gains from the previous two days. Lam Research (LRCX) fell more than 4%. Moreover, ON Semiconductor (ON), KLA Corp (KLAC), Microchip Technologies (MCHP), and NXP Semiconductors NV (NXPI) all fell more than 3%. Moreover, Advanced Micro Devices (AMD), Applied Materials (AMAT), and Marvell Technologies (MRVL) all lost more than 2%.

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Incyte (INCY) fell more than 2% after the FDA rejected the company's application for ruxolitinib extended-release tablets and specified additional conditions for approval.

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Scholastic (SCHL) fell more than -22% after announcing a Q3 adjusted loss per share of -57 cents, a larger loss than the expectation of -38 cents, and lowering its full-year sales outlook to 4%, down from 8% to 10% before.

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Oxford Industries (OXM) fell more than 12% after estimating Q1 adjusted EPS of $3.60-$3.80, below the $4.06 average.

Across the markets

On Friday, June 10-year T-notes (ZNM23) closed up +4 ticks, while the 10-year T-note yield declined by -6.0 basis points to 3.367%. June T-notes rose to a 6-3/4 month nearest-futures high on Friday, while the 10-year T-note yield fell to a 6-1/2 month low of 3.280%. Concerns over the soundness of the global financial system drove demand for government debt as a haven. T-notes, however, dipped off their highs after Friday's U.S. economic data revealed the March S&P manufacturing PMI unexpectedly jumped to a 5-month high. Further weighing on T-note prices was a Friday bounce in bank equities, which pulled the broader market higher.

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