US STOCKS-Futures climb as rate-hike pause hopes rise

BY Reuters | ECONOMIC | 03/23/23 07:42 AM EDT

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Weekly jobless claims data due at 0830 ET


Regional bank stocks rise


U.S. SEC threatens to sue Coinbase, shares tank


Futures: S&P up 0.32%, Nasdaq up 0.83%, Dow flat

(Adds details, comments; updates prices throughout)

By Amruta Khandekar and Ankika Biswas

March 23 (Reuters) - U.S. stock index futures climbed on Thursday after the Federal Reserve hinted it was close to pausing its market-punishing interest rate hikes following the recent turmoil in the banking sector.

The Federal Reserve on Wednesday raised rates by an expected 25 basis points, but its policy statement no longer said "ongoing increases" would likely be appropriate.

The shift in the central bank's tone relieved markets that have been roiled by concerns about a liquidity crisis in the banking sector since the failure of two U.S. regional lenders earlier this month.

However, Wall Street's main indexes closed sharply lower on Wednesday after Powell said the central bank was still intent on fighting inflation even as he flagged credit issues due to banking troubles could have "significant" implications for the economy.

"The impression given by Powell has taken away any hopes the market had that we might get some cut in interest rates later this year," said Stuart Cole, head macro economist at Equiti Capital.

"It seems that the message that the central banks have been giving to date, that returning inflation to target is their number one priority is very much still the message that they're going to deliver despite the banking failures."

Traders' odds are equally split between the Fed pausing its rate hikes in May and another 25 bps hike, according to CME Group's Fedwatch tool.

Bank of America (BAC) and UBS now see the Fed funds rate target peaking at 5-5.25% in May compared to earlier forecasts of 5.25-5.5%.

While U.S. Treasury yields slipped on growing hopes of an end to the Fed's tightening cycle, major growth stocks such as Apple Inc (AAPL), Microsoft (MSFT) and (AMZN) jumped over 1% each in premarket trading.

Nvidia Corp (NVDA) rose 1.9% after Needham raised its price target on the chipmaker on likely benefit from near-term data center strength.

Those premarket gains helped the tech-heavy Nasdaq futures fare better than its peers.

Troubled regional lender First Republic Bank (FRC) rose 2% after slumping on Wednesday following Treasury Secretary Janet Yellen's remark that there was no discussion on insuring all bank deposits.

PacWest Bancorp (PACW), Truist Financial Corp (TFC) and Western Alliance Bancorp (WAL) also gained between 0.8% and 3%.

On the data front, a reading due at 8:30 a.m. ET is expected to show a rise in jobless claims last week, hinting at some cooling in labor demand. Data on home sales is also expected after the opening bell.

Among other stocks, Coinbase Global Inc (COIN) slid 12.9% after the U.S. Securities and Exchange Commission (SEC) threatened to sue the crypto exchange over some of its products.

Regeneron Pharmaceuticals Inc (REGN) jumped 8.6% on promising results on its blockbuster asthma drug Dupixent from a lung disease trial. (Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Savio D'Souza and Vinay Dwivedi)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.