Stocks ended higher on Thursday in what was a turbulent trading session as traders bet that the Federal Reserve may be nearing the end of its rate hiking cycle.
The S&P 500 closed 0.29% higher, while the tech-heavy Nasdaq Composite climbed 1%. The Dow Jones Industrial Average rose 73.66 points, or 0.23%, after climbing up as much as 481.38 points. The broader market index and the Nasdaq gained as much as 1.8% and 2.5%, respectively, before easing from those levels.
Technology stocks outperformed as investors reduced their Fed hike bets and Treasury yields declined, with the SPDR Technology Select Sector (XLK) gaining 1.63%. Microsoft, Nvidia and Apple all advanced. Tech was the hardest hit part of the market as the Federal Reserve raised rates nine straight times in about a year. The turn lower in rates this month is causing investors to rotate back into tech shares.
Meanwhile, regional stocks fell broadly, with the SPDR S&P Regional Banking ETF (KRE) losing 2.78%. To be sure, the fund regained some losses after Treasury Secretary Janet Yellen said the administration is ready to take "additional actions if warranted" to stabilize the U.S. banking system.
The Fed hiked rates by 25 basis points Wednesday, as expected. It also hinted that its inflation-fighting tightening campaign could be nearing the end, with the removal of the phrase "ongoing increases" from its statement.
The Fed's decision and subsequent comments by Chair Jerome Powell at the conclusion of the policymakers' two-day meeting on Wednesday weighed on stocks. While Powell said that "rate cuts are not in our base case" for the remainder of 2023, traders priced in expectations of the central bank lowering rates this year.
"Even if the banking woes have been contained and the deposit flight is over, I don't think they'll prove to be the only set of headlines that pose risks to the economy," wrote Liz Young, head of investment strategy at SoFi. "What might be more likely in coming months is some sort of credit problem as companies' debt matures and they need to refinance their operations at much higher rates than before."
Young continued, "For a long time in this cycle, credit spreads had barely moved. There was virtually no fear in the investment grade or high-yield space … until recently. These were obviously affected by the bank headlines, but if we use markets as forward-looking mechanisms, the increase in spreads portrays bumps ahead."
Apple refuses to roll over; touched 6-month high Thursday
Shortly before lunchtime Thursday Apple touched $161.55 a share, its highest level in six months, since mid-September.
It's easy to argue "as goes Apple, so goes the market." Apple's market value tops the S&P 500 at $2.51 trillion, more than 21% above No. 2 Microsoft ($2.06 trillion). Apple now trades 7% above both its 50-day moving average of $148.34 and its 200-day moving average of $147.88, a sign of momentum that analysts who focus solely on price charts love to see.
While the financial sector has suffered in March, Apple is almost 8% higher this month, bringing its year-to-date gain to almost 22% — more than Alphabet (19%), Amazon (16%), Microsoft (15%), Analog Devices (15%) or NXP Semi (14%).
Bernstein analyst Toni Sacconaghi on Tuesday issued a research report speculating on what Berkshire Hathaway CEO Warren Buffett likes about Apple, a stock he's owned since 2016: "What we believe Buffett got most 'right' about Apple was that it is a leverageable consumer brand, that has enabled the company to expand into product extensions and build a high margin services business."
Berkshire is the second-largest holder in Apple with a 5.66% stake, ahead of Blackrock and behind only Vanguard.
— Scott Schnipper, Michael Bloom
Treasury Secretary Yellen says emergency actions to backstop banks could be used again if needed
Treasury Secretary Janet Yellen said Thursday that the federal emergency actions used to backstop Silicon Valley Bank and Signature Bank customers could be used again if necessary.
"We have used important tools to act quickly to prevent contagion. And they are tools we could use again," Yellen said in written testimony before a House Appropriations subcommittee.
"The strong actions we have taken ensure that Americans' deposits are safe," she added. "Certainly, we would be prepared to take additional actions if warranted."
Her comments come as regulators have aimed to reassure customers and investors amid the banking crisis that was promoted by Silicon Valley Bank's closure.
— Alex Harring, Christina Wilkie
Cryptocurrency prices rebound Thursday afternoon
Cryptocurrency prices jumped on Thursday as investors became optimistic that the Federal Reserve's rate-hiking campaign would soon come to an end. Wall Street also shed some of its fears regarding the ongoing crisis in the banking system.
Crypto rose with other risk assets. All three of the major stock indexes were higher on the day following their Fed-induced sell-off in the previous session.
Check out the full story here.
— Tanaya Macheel, Hakyung Kim
Regional banks continue sliding
Regional banks slipped Thursday, building on Wednesday's selloff as investors continued contemplating the health of the U.S. banking system.
The SPDR S&P Regional Bank ETF (KRE) dropped 7.7% Thursday after falling 5.7% on Wednesday.
PacWest Bancorp was the worst performer in the ETF on Thursday, tumbling 10.1%. Shares fell 17.1% in Wednesday's session.
Closely followed First Republic was also among the worst performers, sliding 8.3% in Thursday's session. The stock finished Wednesday's session down 15.5%.
— Alex Harring
Energy is the biggest laggard in the S&P 500
Energy was the worst performer in the S&P 500, falling 0.7% during afternoon trading Thursday. Schlumberger N.V. shares dropped 2.3%. Halliburton Company and Hess Corporation dropped about 2% and 1.5%, respectively.
— Sarah Min
Stocks making the biggest midday moves
Here are some of the names making the biggest moves midday:
- Netflix — The stock climbed 7.8% following a report from YipitData that said the streaming giant's gross additions in Canada have improved. YipitData wasn't immediately available to for comment.
- Meta Platforms, Snap — Facebook-parent Meta rose 3%, while Snap gained 2.5% as TikTok CEO Shou Zi Chew testified before the House Energy and Commerce Committee. The company faces a potential ban in the U.S. over privacy concerns.
- Regeneron Pharmaceuticals, Sanofi — Regeneron and Sanofi both gained more than 6% after Dupixent, the the asthma drug the companies jointly developed, met all targets in its trial to treat chronic obstructive pulmonary disease (COPD).
To see more companies making moves during midday trading, read the full story here.
— Michelle Fox
Powell and Yellen giving contradictory messages to the markets, says LPL Financial
LPL Financial's chief global strategist Quincy Krosby says that while the Federal Reserve's announcement on Wednesday came in line with expectations, Treasury Secretary Janet Yellen's separate remarks the same day was different than what the central bank was messaging.
"While investors and traders alike were focused on Jerome Powell's comments during the press conference, and somewhat astounded that he consistently reverted to raising the Fed's 'price stability' mandate in nearly every answer, while assuring markets that the banking system was resilient and strong. But he also made a point to say that all depositors are/would be safe," said Krosby.
Krosby said that Janet Yellen's comments on Wednesday afternoon went against her previous reassurances to the banking sector, as well as Powell's attempts to quell concerns of contagion.
"Janet Yellen was at another meeting saying something that contradicted what she had previously indicated regarding the protection of all depositors. At 3:00 p.m. ET, the downdraft in the market began as she did a complete 180, and said it would depend, again suggesting that not all banks would be deemed important and not all depositors would be made whole in the event of a run," Krosby added.
"The contradictions between Powell's comments and Yellen's were confusing to the markets, but Yellen's remarks were seen as backtracking on her commitment to helping keep small banks and their depositors safe in the event of panic setting in, which is the leading cause of contagion," she continued.
"The last thing markets need now is confusion and reneging from its top government officials, but that is exactly what happened. Markets are in oversold territory today and due for a possible bounce, and that may provide relief from a sell off wrought by careless words from a top official."
— Hakyung Kim
Markets are more focused on bank crisis than interest rate hikes, Commonwealth's McMillan says
Wall Street has shifted its focus away from the Federal Reserve's interest rate hikes to the banking crisis, said Brad McMillan, chief investment officer at Commonwealth Financial Network.
McMillan said the market "shrugged" at the interest rate hike of 25 basis points announced Wednesday because it was already expected. Despite the market somewhat bouncing around during Chair Jerome Powell's press conference, McMillan said stocks largely remained calm in what he sees as a sign that Wall Street has moved attention from interest rate hikes to the financial sector's woes.
"The Fed is no longer what markets are worried about and neither, really, is a recession," McMillan said. "What markets are now worried about is a financial crisis."
He said the shift in focus is "interesting" given that the overall banking system is "still working as it should." During his press conference, Powell said that deposit flows in banks had stabilized over the past week and that the weaknesses seen in Silicon Valley Bank were not reflective of broader industry challenges.
— Alex Harring
Starting to see 'the aftermath of the end of easy money,' says Charles Schwab's Liz Ann Sonders
Charles Schwab's chief investment strategist Liz Ann Sonders says that the economic volatility of recent weeks is exposing the effects of years of near-zero interest rates.
"What we're what we're starting to see here is the aftermath of the end of easy money," said Sonders.
"[We] not only have had the most aggressive tightening cycle in 40 years by the Fed, but it started with interest rates at zero and with the balance sheet at $9 trillion dollars, [and an] almost constant era of near-zero interest rates since the Global Financial Crisis. That that was the backdrop for a massive increase in startups and nonprofit bubble companies, and there was capital misallocation," Saunders continued.
Sonders said that weaknesses are not just contained to the banking sector, but across the broader business environment.
"There was inability to do kind of price discovery and I think that we're only at the beginning of this. It's not just banks, it's companies and startups," the investment strategist added.
"It's that that in an environment of lots of liquidity and really low interest rates and low credit spreads, they could, they could fund themselves, they could hire a lot of people and that was the environment, that environment is gone. So this is more than just a situation with regard to banks. This is broader."
She cited Warren Buffett's famous quote: "When the liquidity tide goes out, eventually you see who's been swimming naked."
"I think there are naked swimmers that go beyond just the banking system, and we're just at the beginning of that process. And that, by the way, is not a bad thing. Weaker companies shouldn't be kept afloat. For year after year after year, we suppressed the natural forces of cycles by keeping interest rates at zero for so long. And now we're seeing the aftermath of that. So that's, I think, the important broader message."
— Hakyung Kim
AMC's stock is still overvalued, Citi says
A solid start to the year for the U.S. movie business still doesn't justify the stock price of AMC Entertainment, according to Citi analyst Jason Bazinet.
"While we suspect AMC may be able to reduce leverage as the US box office recovers and via equity issuance, we believe AMC's common equity is overvalued at
prevailing levels," Bazinet said in a note to clients.
After previously suspending its rating, Citi has now resumed coverage of AMC with a sell rating and a price target of just $1.60 per share.
Shares of AMC were trading near $4.60 per share on Thursday, up about 6% for the session.
Netflix stock is rallying, on pace for its best day of the year
Netflix shares are up more than 9% in trading Thursday, following a report from YipitData that said the company's gross additions in Canada have improved. YipitData wasn't immediately available to comment on the report.
Thursday's gain put the stock on pace for its best day of the year back to Oct. 19, 2022, when Netflix added more than 13%. Volume in Netflix shares has been robust. More than 7.8 million shares have changed hands so far today, topping its 30-day average volume of 6.1 million shares.
—Christina Cheddar Berk
Block is still a good value stock amid concerns of criminal activity on CashApp, Baird says
Block is still a good value stock according to Baird, despite concerns over the ease of which criminal activity can persist on the company's CashApp service. Shares of Block plummeted in early trading Thursday.
"We believe CashApp serves and helps many of the underbanked that use the system in a legal fashion," Baird senior research analyst David J. Koning said. He added that CashApp's vulnerability to illegal activity is no different than any other financial institution.
Meanwhile, Baird posits that in a "pretty dire case" where the company loses roughly 20% of CashApp accounts, the result could amount to an 8% hit to total gross profit.
— Brian Evans
Oppenheimer downgrades Coinbase, cites ‘unhealthy regulatory climate’
Oppenheimer Analyst Owen Lau downgraded Coinbase Global to perform from outperform, and removed his $70 price target, citing troubling regulatory signals for the digital asset sector following the collapse of Silicon Valley Bank and Signature Bank and other banks.
The downgrade comes after U.S. Securities and Exchange Commission slapped Coinbase with a Wells notice, saying it's identified possible violations of U.S. securities law. It also comes after the White House "strongly criticized" the digital asset sector this month.
"While we remain highly supportive of blockchain/digital asset development in the US, under this unhealthy regulatory climate, we are increasingly worried about the fairness of the enforcement actions, and the ability for the ecosystem to grow with seemingly limited and shrinking support from the banking system in the US," Lau wrote Thursday.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Social media stocks tick higher as TikTok CEO testifies
Chew will answer questions related to data and privacy as the government weighs how to regulate the technology company, and, like many other tech companies, the potential harms its platform poses to consumers.
— Samantha Subin
Solar stocks surge 8.5% this week, on pace for best week since mid-January
Solar stocks rose 8.5% this week, on pace for its best week since Jan. 13 when the Invesco Solar ETF rose 10.65%. Array Technologies, JinkoSolar Holding and Enphase Energy shares are among the best performers, all up more than 15% or more.
- Array shares are up more than 24% this week, headed for its best week since Jan. 13 when it jumped 25.24%.
- JinkoSolar rose 15.6% this week, headed for its best week since Jan. 13 when it gained 27.52%.
- Enphase shares added more than 15% this week, set for its best week of the year back to Oct 28, 2022 when ENPH gained 21.13%.