S&P 500 turns positive after paring losses on bets of less aggressive Fed

By Yasin Ebrahim

Investing.com – The S&P 500 pared losses Monday, as investors weighed up a sharp drop in rates amid bets of a less aggressive Federal Reserve and ongoing turmoil in the banking sector despite the rescue of SVB.

The S&P 500 was up 0.70%, the Dow Jones Industrial Average rose 0.4%, or 140 points, the Nasdaq Composite surged 1.4%.

Treasury yields plummeted, with the 2-year Treasury falling more than 51 basis points to six-week lows as investors bet that the turmoil in the banking sector may force the Fed to rethink its rate hike path.

“Fed funds futures are reducing pricing for the size of a potential hike at that meeting to be closer to 25bps,” Scotia Economics said in a note. Before the turmoil in the banking sector began to unfold over the back half of last week the market had been pricing most of a 50bps move, Scotia Economics added.

Following the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY), the U.S. government and Federal Reserve stepped to rescue the beleaguered banks, agreeing to backstop all depositors.

The Fed also launched a new funding program offering loans with maturities of up to year.

The support from the Fed failed to stem the turmoil in banks, however, with First Republic Bank (NYSE:FRC) falling more than 50%, while shares of major banks including JPM, BAC, and Citigroup (NYSE:C) also down sharply.         

Tech stocks, however, helped the broader market recovery underpinned by the fall in Treasury yields.

Microsoft (NASDAQ:MSFT) was up 3%, Apple (NASDAQ:AAPL) up more than 2% following by Meta Platforms (NASDAQ:META) and Google-parent Alphabet (NASDAQ:GOOGL).

In other news, Roku (NASDAQ:ROKU) cut losses to trade above flatline after the company said Friday it revealed it had about $487 million, or 26%, of its cash reserves stuck at Silicon Valley Bank. 

In deal news, Seagen (NASDAQ:SGEN) jumped than 15% on news the health-care company will be acquired by Pfizer (NYSE:PFE) to boost the latter’s cancer treatment portfolio.