Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to extend the upward move seen over the course of the previous session.

Easing concerns about turmoil in the financial sector may lead to continued strength on Wall Street following recent steps taken to rescue distressed banks in the U.S. and Europe.

Positive sentiment may also be generated in reaction to remarks by Treasury Secretary Janet Yellen, who said the government is prepared to once again take action to protect bank depositors if smaller lenders are threatened.

In remarks prepared for a speech to the American Bankers Association, Yellen addressed recent steps taken to protect depositors following the failures of Silicon Valley Bank and Signature Bank.

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” Yellen said.

She continued, “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

However, some traders may stick to the sidelines ahead of the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

While the recent banking turmoil led to some speculation the Fed may leave interest rates unchanged, CME Group’s FedWatch Tool is currently indicating an 81.9 percent chance of a 25 basis point rate hike.

Following the sharp pullback seen last Friday, stocks fluctuated over the course of the trading session on Monday but largely maintained a positive bias.

The major averages all finished the day in positive territory. The Dow jumped 382.60 points or 1.2 percent to 32,244.58, the Nasdaq rose 45.02 points or 0.4 percent to 11,675.54 and the S&P 500 advanced 34.93 points or 0.9 percent to 3,951.57.

The strength on Wall Street partly reflected a positive reaction to the latest efforts to address turmoil in the banking sector, including UBS Group’s (UBS) state-backed acquisition of Credit Suisse (CS).

U.S.-listed shares of UBS jumped by 3.3 percent following the news it will acquire its troubled rival for 3 billion Swiss francs, or $3.2 billion. However, Credit Suisse plummeted by 53.0 percent.

The Federal Reserve also announced it has joined with other central banks around to world to take coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

The central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily in order to improve the swap lines’ effectiveness in providing U.S. dollar funding.

Additionally, shares of New York Community Bank (NYCB) soared by 31.7 percent on news its subsidiary Flagstar Bank will acquire substantially all of Signature Bank’s deposits and certain loan portfolios as well as all 40 of its branches.

Oil service stocks showed a substantial move back to the upside, with the Philadelphia Oil Service Index spiking by 3.0 percent after ending last Friday’s trading at a five-month closing low.

The rally by oil service stocks came as the price of crude oil for April delivery showed a notable recovery after seeing early weakness.

Significant strength was also visible among tobacco stocks, as reflected by the 2.3 percent surge by the NYSE Arca Tobacco Index.

Steel, chemical and natural gas stocks also saw considerable strength on the day, while software stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are jumping $1.03 to $68.67 a barrel after advancing $0.90 to $67.64 a barrel on Monday. Meanwhile, after rising $9.30 to $1,982.80 an ounce in the previous session, gold futures are falling $16 to $1,966.80 an ounce.

On the currency front, the U.S. dollar is trading at 132.02 yen compared to the 131.32 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0779 compared to yesterday’s $1.0721.

Asia

Asian stocks rose broadly on Tuesday as active steps to rescue distressed banks in the U.S. and Europe helped ease fears of a banking crisis.

The upside remained capped as investors awaited cues from the Federal Reserve’s guidance at a pivotal monetary policy meeting.

Traders and economists remain split on whether the Federal Reserve will pause or go forward with a 25 basis point rate hike at the conclusion of a two-day policy meeting on Wednesday.

The dollar held steady after U.S. Treasury yield made a substantial recovery on Monday. Gold was little changed, while oil resumed declines on recession worries after rebounding from a 15-month low overnight.

Chinese shares rose notably, led by defense stocks after the nation’s state assets regulator said it would encourage and support centrally administered defense SOEs to “become stronger, better, and bigger.”

The benchmark Shanghai Composite Index settled 0.6 percent higher at 3,255.65, while Hong Kong’s Hang Seng Index rallied 1.4 percent to close at 19,258.76 ahead of Tencent’s earnings release.

Japanese markets were closed for Vernal Equinox holiday. Seoul stocks eked out modest gains, with the Kospi rising 0.4 percent to 2,388.35.

South Korea’s producer prices rose for the second straight month in February as service prices increased, central bank data showed earlier in the day.

Australian markets recovered from four-month lows after the minutes from the Reserve Bank of Australia’s March 7 board meeting showed board members are likely to discuss a pause in interest rate increases at its forthcoming policy meeting on April 4.

The benchmark S&P/ASX 200 Index climbed 0.8 percent to 6,955.40, while the broader All Ordinaries Index ended 0.8 percent higher at 7,142.20.

Banks rose broadly, with ANZ and Westpac gaining more than 1 percent amid moves to prop up struggling global banks. Mining heavy weights BHP and Rio Tinto gained around 1 percent each, while gold miners ended on a mixed note.

Europe

European stocks have moved sharply higher on Tuesday as a two-day policy meeting of the Federal Reserve gets underway later today, with markets expecting a 25 basis point rate hike on Wednesday. The Fed commentary and dot plot hold the key for future course of dollar and yields.

While the U.K.’s FTSE 100 Index has shot up by 1.6 percent, the French CAC 40 Index and the German DAX Index are both by 1.7 percent.

Banks top the gainers list as fears of a widespread contagion risk have eased somewhat after the takeover of Credit Suisse.

Automakers BMW, Volkswagen and Renault have also risen after industry data showed European new passenger car registrations continued to strengthen in February albeit due to the low base of comparison given the semiconductor shortage at the beginning of 2022.

Passenger car sales increased 11.5 percent on a yearly basis to 802,763 units in February. This followed an 11.3 percent increase in January.

Pernod Ricard SA has also moved higher. The French spirits and wines firm said that its American unit has inked a deal to buy a majority stake in Skrewball, a peanut butter flavored whiskey brand.

British home improvement retailer Kingfisher has also moved to the upside despite posting a drop in FY profits and revenue.

In economic news, the U.K. budget deficit widened to its highest February level due to the substantial spending on energy support schemes, the Office for National Statistics said.

Public sector net borrowing excluding banks increased by GBP 9.7 billion from the last year to GBP 16.7 billion in February. This was the highest February borrowing since records began in 1993.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on existing home sales in the month of February at 10 am ET. Existing home sales are expected to increase to an annual rate of 4.17 million in February from 4.0 million in January.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $12 billion worth of twenty-year bonds.

Stocks In Focus

Shares of Harley-Davidson (HOG) are seeing significant pre-market strength after Morgan Stanley upgraded its rating on the motorcycle maker to Overweight from Equal Weight.

Athletic apparel and footwear retailer Foot Locker (FL) is also likely to see initial strength after Citi raised its rating on the company’s stock to Buy from Neutral.

Shares of Meta Platforms (META) may also move to the upside after Morgan Stanley upgraded its rating on the Facebook parent to Overweight from Equal Weight.