Wall Street futures saw early gains fade Monday morning after regulators stepped in to avoid a possible banking crisis after the collapse of Silicon Valley Bank. European markets were weaker. TSX futures also turned negative.
In the early premarket period, Dow, S&P and Nasdaq futures had initially been higher but quickly slid after posting losses last week. TSX futures had also suggested a bounce at the opening bell only but lost altitude as the start to the trading day neared. Canada’s key stock index posted losses of more than 3 per cent last week.
Early Monday, all eyes were on the banking sector after the failure of the Santa Clara, California-based bank triggered contagion concerns. Early Monday, shares of U.S. regional bank First Republic were down more than 60 pre cent in premarket trading while shares of PacWest Bankcorp slumped more than 20 per cent.
“SVB’s flash crash raised questions that other similar local banks in the U.S. could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“The contagion risk remains for small banks with highly rate-sensitive clients, but the U.S. authorities now step in to avoid contagion. They said that SVB depositors could access their money today,” she said.
However, she also noted that concern about the situation could convince the Federal Reserve to change its course on rate hikes. She said it’s now possible the U.S. central bank could pullback on an expected 50-basis-point increase this month or forgo an increase altogether.
Over the weekend, the Federal Reserve, Treasury and Federal Deposit Insurance Corp. announced in a joint statement that “depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.” The agencies also said that they would enact a similar program for Signature Bank, which the government disclosed was closed Sunday by its state chartering authority, according to Reuters.
In this country, Canada’s banking regulator took control of Silicon Valley Bank’s domestic operations on Sunday, as governments, along with tech sector CEOs, spent the weekend scrambling to limit the impact of a leading global technology financer’s sudden collapse, The Globe reports this morning.
In Britain, meanwhile, HSBC said on Monday it is acquiring the U.K’ subsidiary of Silicon Valley Bank for 1 pound. “This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.
Elsewhere, Canadian investors will got household-debt-to-income figures from Statistics Canada.
The agency said, on a seasonally adjusted basis, the household credit market debt as a proportion of household disposable income improved to 180.5 per cent in the fourth quarter from 184.3 per cent in the third quarter, and was down from 184.5 per cent at the end of 2021. In other words, there was $1.81 in credit market debt for every dollar of household disposable income in the fourth quarter of 2022, Statscan said.
Overseas, the pan-European STOXX 600 was down 1.2 per cent in morning trading with bank stocks under pressure. Britain’s FTSE 100 slid 1.06 per cent. Germany’s DAX and France’s CAC 40 were off 1.15 per cent and 1.26 per cent, respectively.
In Asia, Japan’s Nikkei ended down 1.11 per cent. Hong Kong’s Hang Seng rose 1.95 per cent on gains in technology stocks.
Commodities
Crude prices fell in early trading, underpinned by optimism over China’s recover and a softer U.S. dollar but offset by continued worries about the road ahead for U.S. interest rates.
The day range on Brent was US$82.25 to US$83.48 in the early premarket period. The range on West Texas Intermediate was US$76.14 to US$77.47.
“It’s like the battle of surging activity data in the East meets macro malaise in the West”, Stephen Innes, managing partner of SPI Asset Management, said.
“From an oil trader’s perspective, the U.S. dollar should pull back as traders give up on a re-acceleration of Fed hikes; this, in turn, clears a path for more robust Chinese fundamentals to dominate commodity trading,” Mr. Innes said.
Reuters reported that comments over the weekend from Saudi Aramco CEO Amin Nasser on crude demand from China also offered some support.
“If you considered China opening up and a pick up in jet fuels and very limited spare capacity, we are talking 2 million barrels, so as I said we are cautiously optimistic in the short to midterm and the market will remain tightly balanced,” he said.
In other commodities, gold prices rose as investors sought out safe-haven assets amid concern over the collapse of Silicon Valley Bank.
Spot gold was up 0.6 per cent at US$1,878.54 per ounce by early Monday morning. Earlier in the session, bullion hit its highest since Feb. 3 at US$1,893.96.
U.S. gold futures gained 0.9 per cent to US$1,884.30.
Currencies
The Canadian dollar was up early Monday morning as its U.S. counterpart fell against a group of world currencies on speculation the collapse of Silicon Valley Bank could move the Fed to pause rate hikes.
The day range on the loonie was 72.15 US cents to 72.93 US cents in the predawn period.
“The CAD is trading a little firmer against a generally soft USD but it has edged off earlier highs,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Canada’s jobs report Friday may not move the needle for the BoC at the moment but the strong report—in pretty much all aspects—does tilt risks towards the BoC having to return to tightening down the road.”
The U.S. dollar index, which measures the U.S. currency against six rivals, fell 0.55 per cent to near one-month lows of 103.67 after Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting, Reuters reports. The index was last at 103.85.
The euro was up 0.72 per cent at US$1.072, hovering near the one-month high of US$1.0737. Sterling was last trading at US$1.2114, up 0.71 per cent.
In bonds, the yield on the U.S. 10-year note was down at 3.602 per cent.
More company news
Pfizer will spend US$43-billion to buy Seagen and deepen its reach into treating cancer. The pharmaceutical giant said Monday that it will pay US$229 per Seagen share. “Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s antibody-drug conjugate (ADC) technology with the scale and strength of Pfizer’s capabilities and expertise,” Pfizer Chairman and CEO Dr. Albert Bourla said in a statement.
Economic news
(8:30 a.m. ET) Canada’s national balance sheet and financial flow accounts for Q4.
Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
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Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
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