Latest on the banking crisis and global markets

Nike had a strong holiday, but it came at a cost.

Nike’s sales increased 14% during the quarter, but the company had to mark down products to clear them off shelves. That hurt Nike’s profit.

The company’s profit margin fell 3.3 percentage points during its latest quarter to 43.3%, disappointing analysts.

Nike’s stock fell around 1% during after-hours trading Tuesday.

Nike has been dealing with an inventory glut.

Inventories were up 16% from the year prior after the company reported a 44% jump the previous quarter, Nike said on Tuesday.

US stocks closed higher on Tuesday as shares of regional banks rebounded from record-breaking losses earlier in the month.

Shares of troubled lender First Republic led the way, soaring 30%, making back a large portion of the losses from its 47% plunge in the prior session. The SPDR Regional Banking ETF (KRE), which tracks a number of small and mid-sized bank stocks, gained 5.8% for the day.

The boost came after US Treasury Secretary Janet Yellen said on Tuesday at an event hosted by the American Bankers Association that the federal government was willing to guarantee more deposits should the current banking meltdown continue.

Investors were also buoyed by news that JPMorgan Chase CEO Jamie Dimon was advising the beleaguered First Republic Bank on next steps and strategy.

Wall Street will closely watch the Federal Reserve as the central bank announces its next monetary policy decision on Wednesday afternoon.

Investors are largely pricing in a quarter-point rate hike and will listen closely to see if Fed Chair Jerome Powell is able to justify hiking rates while reassuring panicked markets that the Fed can maintain the safety and security of the banking system.

The Dow closed up 299 points, or 0.9%.

The S&P 500 rose by 1.2%.

The Nasdaq Composite closed 0.9% higher.

As stocks settle after the trading day, levels might still change slightly.

Leading bank CEOs are not working on a new rescue plan for regional bank First Republic, a person familiar with the matter tells CNN.

First Republic received a $30 billion lifeline just last week from 11 of the nation’s largest banks, including JPMorgan Chase, Bank of America and Citigroup.

Despite that industry-led rescue, First Republic’s share price kept plunging and its credit ratings were downgraded.

The Wall Street Journal reported Monday that JPMorgan CEO Jamie Dimon is leading talks among bank CEOs about fresh efforts to stabilize First Republic, including a potential investment by the banks themselves in First Republic.

The 11 bank CEOs have discussed the First Republic situation, the person familiar with the matter tells CNN. However, the source stresses there is no separate rescue plan for First Republic currently being worked on by the bank CEOs.

Meanwhile, major bank CEOs are gathering Tuesday and Wednesday in Washington for a previously-scheduled meeting, the person familiar with the matter said.

That meeting is being held by the Financial Services Forum, an alliance of the biggest eight banks that includes Bank of America, Goldman Sachs and JPMorgan.

First Republic and the broader stress in the banking system will be among the topics discussed at the bank CEO meeting, the source said.

After hitting a record low on Monday, shares of First Republic Bank surged 53% Tuesday afternoon as Wall Street anticipated another industry-led lifeline or potential sale of the beleaguered banks.

Bank stocks were broadly higher Tuesday.

Switzerland’s finance department has ordered Credit Suisse to suspend the payment of certain types of bonuses to the bank’s staff.

“This measure relates to already granted but deferred remuneration for the financial years up to 2022, for example in the form of share awards,” the country’s Federal Council said in a statement released late Tuesday.

Deferred payments that are already in the process of being made are exempt, it added.

The council cited a Swiss law that stipulates the imposition of “remuneration-related measures if a systemically important bank is directly or indirectly granted state aid from federal funds.”

As Credit Suisse teetered on the brink of collapse last week, it drew on a cash lifeline from the Swiss central bank. But that wasn’t enough to repair the lender’s shredded reputation and, over the weekend, the Swiss government brokered a rescue takeover of Credit Suisse by larger rival UBS.

As part of the deal, the Swiss government is offering to protect UBS against losses of 9 billion Swiss francs ($9.8 billion), and the Swiss central bank has said it will provide liquidity of up to 200 billion Swiss francs ($217 billion).

The Federal Council has also instructed the finance department to propose further measures on variable remuneration, or bonuses, for the financial years up to 2022 and onward.

Wall Street was mostly quiet one day ahead of a rate announcement from the Federal Reserve. The Dow was up by around 0.5%, the S&P gained 0.7% and the Nasdaq was up 0.6% by the end of morning trade.

European stocks ended their day higher after mixed trading due to ongoing skittishness about the collapse of Credit Suisse.

Europe’s Stoxx Europe 600 index closed up 1.3%, while the FTSE jumped by around 1.8%. Shares in Credit Suisse rose by 7% and UBS rose 12%.

Shares of First Republic Bank bounced back sharply from a record low after JPMorgan Chase’s investment bank was hired to advise the ailing New York-based bank and to help management explore its options, including potentially raising additional capital.

Other regional banks also rallied: The SPDR Regional Banking ETF, which tracks a number of small and mid-sized bank stocks, got a 5.7% boost by the end of morning trading.

Investors expect the central bank to approve a quarter-point hike as Fed Chair Jerome Powell seeks middle ground, neither straining the economy to breaking point nor pulling too far back on his yearlong attack on inflation.

“Powell has been stuck between a rock and a hard place from the moment he became Chair,” Ann Berry, founder of Threadneedle Ventures, told CNN’s Christine Romans. “History won’t judge kindly the late start to Fed tightening and the failure to catch SVB’s obviously flawed risk management.”

The European Central Bank’s top banking supervisor said Tuesday that the capital and liquidity positions of European banks was “solid,” while cautioning that signs of credit risk were appearing in parts of their loan books.

“Banks’ capital and liquidity positions remain solid and well above minimum requirements,” the ECB’s Andrea Enria told European Union lawmakers.

But European banks needed to be watching carefully for risks to their funding and liquidity that could arise from “the fast-paced adjustment of interest rates,” he said.

The ECB was also closely monitoring “increasing credit risk in certain sectors,” Enria said. While non-performing loans — loans where the borrower misses repayments — have declined overall, the central bank has seen “some upticks,” particularly in the area of consumer finance, Enria said.

But he emphasised the overall strength of European banks and drew a stark comparison with lenders in the United States. Enria said that the decision of US officials in 2018 to roll back some regulations applied to banks following the 2008 financial crisis had proved “damaging.”

Under the pared-back rules, small and mid-sized banks — those with assets below $250 billion, like now-collapsed Silicon Valley Bank — were no longer obliged to undergo annual tests by the Federal Reserve of their ability to withstand financial stress.

ECB President Christine Lagarde said in a press conference Monday that regulations for smaller-sized banks had not been weakened in Europe.

Basel III, a set of international standards developed in response to the 2008 crisis, applied to 2,200 European banks, compared with just 14 in the United States, Lagarde said. 

US Treasury Secretary Janet Yellen emphasized Tuesday that the American banking system remains sound and called on the government and industry to boost public confidence in the banks.

“I do believe we have a very strong and resilient banking system and all of us need to shore up the confidence of depositors that that’s the case,” Yellen said at an event hosted by the American Bankers Association..

Yellen added that community banks in particular are healthy and urged them to reassure their customers.

The Treasury secretary reiterated that the federal government would be willing to rescue uninsured depositors at small banks if lenders suffer bank runs, raising the specter of contagion.

“We are ready and prepared to take the steps that are necessary to ensure depositors that the banking system and their deposits are safe,” Yellen said.

Treasury Secretary Janet Yellen stressed on Tuesday that the ongoing stress in the banking industry is quite different from the 2008 financial meltdown.

“This is different from 2008. 2008 was a solvency crisis. Rather what we’re seeing are contagious bank runs,” Yellen said in response to a question at an event hosted by the American Bankers Association.

In her prepared remarks, Yellen said even though officials don’t have all the details yet about the collapse of Signature Bank and Silicon Valley Bank, “we do know that the recent developments are very different than those of the Global Financial Crisis.”

“Back then, many financial institutions came under stress due to their holdings of subprime assets. We do not see that situation in the banking system today,” Yellen said.

Yellen added that the system is “significantly stronger” than 15 years ago, in large part due to post-crisis reforms like Dodd-Frank.

Yellen said it will be “vital for us to get a full accounting” of what happened in the recent bank failures.

The Federal Reserve has already launched a review into what happened with Silicon Valley Bank, the biggest bank collapse since 2008.

“We will need to reexamine our current regulatory and supervisory regimes and consider whether they are appropriate for the risks that banks face today,” Yellen said. 

One of Europe’s biggest pension funds has sold its entire stake in troubled US regional bank First Republic, after suffering losses of around $728 million.

The CEO of Alecta, a Swedish pension fund that manages more than $100 billion in assets, told CNN that “the uncertainty over the bank’s future was too great.”

Magnus Billing cited concerns over recent credit downgrades for the bank, and the fact that government and financial industry efforts to support First Republic had not helped its tumbling share price.

First Republic’s share price has plummeted 90% to record lows over the past month as investors scrutinized lenders with a high amount of uninsured depositors — a response to the collapse of Silicon Valley Bank and Signature Bank.

It continued to nosedive even after 11 of America’s biggest banks, including JPMorgan, Citigroup and Wells Fargo, provided First Republic with a $30 billion rescue last week. Despite that effort, Moody’s and S&P Global Ratings downgraded First Republic’s credit ratings over the weekend.

The median price of a US home was lower this February than it was in February 2022, ending more than a decade of year-over-year increases, the longest on record, according to a National Association of Realtors report released Tuesday.

The median existing home price was $363,000 in February, down 0.2% from a year ago. This marks the first year-over-year price decline in 131 consecutive months of year-over-year increases that began in February 2012.

But home sales vaulted higher, making the largest monthly percentage increase since July 2020.

As median home prices were lower than a year ago, US home sales surged in February, following a full year of declining home sales due to surging mortgage rates and prices that remained elevated, which kept homebuyers out of the market. February’s reversal in sales also ended the longest streak of month-to-month declining home sales on record, going back to 1999 for all homes and 1968 for single-family homes.

Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — shot up 14.5% in February from January. But sales were down 22.6% from a year ago. 

The seasonally adjusted annualized sales pace dropped from 5.92 million units a year ago to 4.58 million. The steep decline in sales activity is driven by the large increase of mortgage rates over the past year. 

Mortgage rates remain volatile — in February, rates rose half of percentage point — but prices are cooling, according to NAR.

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said Lawrence Yun, NAR’s chief economist. “We’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Inventory remains stubbornly low, said Yun.

Total housing inventory at the end of February was 980,000 units, the same as last month and up 15.3% from one year ago. Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months a year ago.

“Inventory levels are still at historic lows,” Yun added. “Consequently, multiple offers are returning on a good number of properties.”

Wells Fargo Chief Economist Jay Bryson says the Federal Reserve may briefly pause its tightening effort following the fall of Silicon Valley Bank.

“We’ve seen a tightening in financial markets, and so the Fed may decide to pause here and just to see how things settle down,” Bryson told CNN Chief Business Correspondent Christine Romans.

Bryson noted a pause could help calm and “restore some confidence,” in the financial system following the fall of SVB which rattled the markets.

Bryson also discussed uncertainty and the potential for more small bank failures in the future.

“I wish I could say we have seen the last of small bank failures. But, you know, uncertainty is very high right now. You know, we’ll see how things play out.”

There is no “right answer” for the Federal Reserve as it meets to discuss US interest rates, according to Bill Dudley, a former President of the New York Federal Reserve.

Speaking to CNN’s Julia Chatterley, he said the Fed could “pause and signal that further rate hikes are likely once the situation gets stabilized, or they could hike 25 basis points and make it very clear that they are very focused on what is going on with the banks. Either option is a completely reasonable one.”

Bill Dudley added that it doesn’t matter “as much as people think” what the Fed does on Wednesday, saying what matters is that “can they stabilize the banking system so they can free up their ability to tackle inflation.”

He explained that the current situation was “very different” to the 2008 financial crisis, saying it was “much more manageable” and would cause “much less damage” to the US economy.

Bill Dudley was President of the New York Federal Reserve from 2009 to 2018, and was a member of the Fed’s interest rate setting committee. 

The Dow surged more than 300 points on Tuesday morning as investors clung to hopes that this month’s banking crisis may finally be contained.

Shares of regional banks rebounded after plunging to record lows following the collapse of Silicon Valley Bank and Signature Bank earlier this month. First Republic opened nearly 30% higher after dropping 47% the session before and Western Alliance was up 11%.

The SPDR Regional Banking ETF (KRE), which tracks a number of small and mid-sized bank stocks, got a 5.5% boost on Tuesday morning after US Treasury Secretary Janet Yellen wrote in prepared remarks that the federal government would intervene and rescue more banks if necessary.

Yet Tuesday’s gains could be the calm before the storm.

The Federal Reserve is widely expected to announce another quarter-point rate hike on Wednesday, which could send investors into panic mode once more as higher interest rates ripple through the already-delicate banking system.

“The Fed shouldn’t raise the federal funds rate,” wrote Gregory Daco, chief economist at EY, in a note. With economic activity slowing, inflation easing and broad-based financial uncertainty, “the optimal approach would be to pause the tightening cycle to assess economic and financial conditions over the next few weeks,” he wrote.

Investors will watch Treasury Secretary Yellen address the American Bankers Association at 10 a.m. ET for more clues about plans to shore up the US banking system.

The Dow was up 335 points, or 1%, on Tuesday morning.

The S&P 500 gained 1%.

The Nasdaq Composite was 0.9% higher.

Moody’s has revised down its outlook on two types of its ratings for UBS.

The change to “negative” from “stable,” comes two days after UBS agreed to rescue Swiss rival Credit Suisse in a $3.25 billion deal.

The move follows the same change to the outlook for UBS made by S&P Global on Monday.

Moody’s changed its outlook for the bank’s long-term deposit and senior unsecured ratings, saying that the takeover of Credit Suisse posed “significant financial, cultural and franchise-related integration challenges” for UBS.

The credit rating agency maintained its ratings for UBS.

US futures shot higher in pre-market trading Tuesday as investors look to continue yesterday’s rally and remain optimistic that the recent banking meltdown can be contained. 

The rebound was led by a surge in regional bank stocks. Shares of First Republic jumped nearly 17% after falling 47% to a new low on Tuesday. The SPDR S&P Regional Banking ETF, which tracks a number of small and mid-sized banks, was up 3.7% in pre-market trading. 

The jump wasn’t contained to regional banks. Shares of Citigroup, JPMorgan, Wells Fargo and Bank of America were all trading higher ahead of the bell. 

The swell in banking stocks comes after Treasury Secretary Janet Yellen wrote in remarks that the US is prepared to intervene and rescue more small banks and depositors if necessary.  

Still, it’s unclear if Wall Street sees clear skies ahead or if markets are sitting in the eye of of the storm.

The Federal Reserve begins its two-day policy meeting in Washington, DC, today and investors are widely expecting the central bank to announce a quarter-point rate hike on Wednesday afternoon, according to the CME FedWatch tool. 

But some analysts are pressing for the Fed to pause hikes, claiming that a hike in interest rates could cause more banking and market havoc. 

“While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient,” wrote Goldman Sachs analysts led by chief economist Jan Hatzius in a recent note. “Addressing stress in the banking system is the most immediate concern and must take priority over other less urgent goals for the moment.”

Investors, meanwhile, will watch Secretary Yellen address the American Bankers Association at 10 a.m. ET for more clues about plans to shore up the US banking system. They’ll also gauge February existing home sales, due out after the bell. 

The federal government could once again come to the rescue of uninsured bank depositors if smaller lenders suffer bank runs like the one that collapsed Silicon Valley Bank, according to prepared remarks from US Treasury Secretary Janet Yellen.

Yellen argues the government’s “decisive and forceful actions” have successfully calmed the banking crisis and boosted confidence in the system.

“The situation is stabilizing. And the US banking system remains sound,” Yellen said in the remarks, to be delivered at the American Bankers Association’s Washington DC Summit on Tuesday.

Yellen said a new lending facility launched by the Federal Reserve along with its existing discount window are “working as intended to provide liquidity to the banking system.” She said deposit outflows from regional banks, in aggregate, have “stabilized.”

Fearing a series of bank runs, the Federal Deposit Insurance Corporation stepped in to protect all depositors — even those above the $250,000 insurance limit — after Silicon Valley Bank and Signature Bank failed.

“Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” Yellen said, adding that officials were not focused on “aiding specific banks or classes of banks.”

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Shares of First Republic rose sharply in premarket trading Tuesday as the struggling regional bank is widely expected to receive a new lifeline or a sale.

First Republic’s stock rose 22% in premarket trading after falling 47% to a record low Monday, as the bank struggled to persuade Wall Street it could remain viable.

Shares were halted several times for volatility, and they sank further after a report from the Wall Street Journal said rival banks led by JPMorgan (JPM) are trying to work on yet another rescue plan for First Republic.

JPMorgan and First Republic declined to comment on the report.

In a statement, a spokesperson for First Republic said the bank “is well positioned to manage short-term deposit activity.”

Despite having received a $70 billion loan from JPMorgan a week ago and another $30 billion lifeline from a consortium of banks on Thursday, investors apparently weren’t optimistic about the bank’s prospects.

Stocks: US stock futures were higher Tuesday as investors continued to make sense of the banking crisis and its fallout. First Republic shares bounced back sharply after hitting a new low Monday. Dow futures were up 150 points, or 0.5%. S&P 500 futures rose 0.5%. Nasdaq Composite futures were 0.2% higher. European markets were sharply lower, and Asian markets were mostly up, too.  

Fear & Greed Index: 32 = Fear 

Oil & gas: US oil prices were up 1% to $69 a barrel. Average US gas prices fell to $3.44 a gallon. 

Gold & bitcoin: Gold fell 0.6% to $1,971 a troy oz. Bitcoin was unchanged at $27,800.

European and Asian stocks rose Tuesday as concerns about the global banking sector eased in response to a whirlwind of intervention by policymakers and industry players.

Europe’s Stoxx Europe 600 index gained 1.5% in early trade, while the region’s Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, jumped 3.6%.

But the bank-specific benchmark is still down almost 13% from its high in late February.

London’s bank-heavy FTSE 100 (UKX) index rose 1.4% in morning trade, while France’s CAC 40 (CAC40) posted gains of 1.7% and Germany’s DAX (DAX) 1.6%.

In Asia Pacific, Australia’s S&P/ASX 200 rose 1.3%, boosted by its AXFJ index, a measure of banking stocks, before closing the day 0.8% higher.

In Hong Kong, the Hang Seng Index (HSI) ended 1.4% up, while China’s Shanghai Composite closed 0.6% higher.

South Korea’s Kospi ticked up 0.4%. Japanese markets were closed for a public holiday. Singapore’s Straits Times Index gained 1.2%.

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One of Europe’s leading banks is moving quickly to reassure investors it isn’t holding significant quantities of a particularly risky type of bonds issued by Credit Suisse.

Credit Suisse’s “alternative tier one”— or AT1 — bonds were subject to a “complete writedown” of their nominal value of 16 billion Swiss francs ($17 billion) as a condition of the Swiss government’s support for the emergency rescue by UBS.

“Our exposure to Credit Suisse’s AT1s is near zero,” Deutsche Bank said in a statement Monday.

Deutsche Bank had its own share of troubles in the middle of the past decade, but Germany’s biggest bank has rebounded strongly, and last month reported its highest pre-tax profit in 15 years.

Shares in the bank were down 3% on Monday, broadly in line with the wider European banking sector.

Christine Lagarde, president of the European Central Bank, said in a speech Monday afternoon that banks in the euro area had a “very limited exposure” to Credit Suisse, particularly in relation to AT1 bonds.

“We’re not talking billions, we’re talking millions,” she said.

Analysts said the surprise move to wipe out Credit Suisse’s AT1 bondholders had unsettled investors, particularly as shareholders – typically the last in line for a payout when a bank fails – would be receiving something.

EU banking regulators, while welcoming the “comprehensive set of actions” taken Sunday by Swiss authorities, said Monday they would act differently if ever the need arises.

“In particular, common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier One be required to be written down,” the Single Resolution Board (SRB), the European Banking Authority and the European Central Bank said in a joint statement. “This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions.”

Some background: AT1s belong to a type of bank capital known as “contingent convertibles.” They are popular with institutional investors because they often offer a higher yield than other bank debt and corporate bonds with a similar rating. However, their “convertible” nature means they can be written down completely, or swapped for equity if a bank gets into distress.

Lenders of last resort — central banks — and some of the industry’s strongest players provided huge sums of emergency cash to support teetering banks since the global banking crisis began.

More than $400 billion has gone so far in direct central bank support.

In guaranteeing all deposits at Silicon Valley Bank and Signature Bank, the US Federal Reserve is on the hook for $140 billion.

Then there’s the $54 billion the Swiss National Bank offered Credit Suisse in the form of an emergency loan, and 209 billion Swiss francs ($225 billion) offered to UBS in loans, guaranteed by the Swiss states, and protection against potential losses.

The Fed has also agreed to record amounts of loans to other banks this week. Banks borrowed nearly $153 billion from the Fed in recent days, smashing the previous record of $112 billion set during the crisis of 2008.

Banks also drew on nearly $12 billion of loans from the Fed’s new emergency lending program established at the start of the week with the aim of preventing more banks from collapsing.

The $318 billion the Fed has loaned in total to the financial system is about half what was extended during the global financial crisis.

“But it is still a big number,” said JPMorgan’s Michael Feroli in a note to investors Thursday. “The glass half-empty view is that banks need a lot of money. The glass half-full take is that the system is working as intended.”

The banking industry has also coughed up billions. JPMorgan Chase, Bank of America and Citigroup are among a group of 11 lenders providing the $30 billion cash infusion aimed at shoring up confidence in First Republic Bank.

HSBC has reportedly committed more than $2 billion to SVB’s UK business, which it bought on Sunday for £1.

CNN’s Anna Cooban contributed to the reporting.

S&P Global on Monday revised down its outlook on UBS after the bank agreed to rescue Swiss rival Credit Suisse in a $3.25 billion deal.

The credit ratings agency changed its outlook to negative from stable, citing “material execution risk” concerns with UBS’s acquisition of Credit Suisse.

“In our base case, we already anticipate client churn at the combined entity, particularly in wealth management and Swiss banking, where both entities have significant client overlaps,” S&P Global said in a note.

S&P Global maintained its issuer credit ratings for UBS.

Stocks closed higher on Monday as investors grew more optimistic about global regulators’ ability to contain the banking crisis.

The rally comes after UBS agreed to buy troubled Swiss lender Credit Suisse for $3.25 billion on Sunday. The bank’s move is the latest in a string of interventions from global governments and industry players who have stepped in to help stymie the tumult in the financial sector.

Shares of UBS rose about 3.3% in an intraday reversal. Shares of New York Community Bancorp soared by over 31%, lifted by its purchase of virtually all of Signature Bank’s deposits and $38.4 billion worth of the failed bank’s assets.

Still, regional banks aren’t out of the woods just yet. Shares of First Republic fell to an intraday record low before ending the session down about 47% in another day of steep losses for the company.

Recession fears also continued to dog investors ahead of the Federal Reserve’s meeting set to conclude Wednesday. Traders see about a 73% probability of the central bank raising interest rates by a quarter point.