Stocks close higher Friday as investors try to shake off latest bank fears

Pro Picks: Watch all of Friday's big stock calls on CNBC
Pro Picks: Watch all of Friday's big stock calls on CNBC

Stocks rose Friday after a volatile trading session. Although Friday began with fears that the banking crisis was spilling over to Deutsche Bank, the markets rebounded to end the week on a higher note.

The Dow Jones Industrial Average gained 132.28 points, or 0.41%, on Friday, closing at 32,237.53. The S&P 500 rose 0.56%, while Nasdaq Composite ticked up 0.3%. The major indexes all had a winning week, with the Dow gaining 1.2% week-to-date, while the S&P 500 and Nasdaq climbed 1.4% and 1.7%, respectively.

One factor that helped the market was a bounce back in regional bank stocks. The sector rallied on Friday, with the SPDR S&P Regional Banking ETF gaining 3.01% during the trading session. Amid all the volatility, the KRE ended the week up 0.18%.

A selloff of Deutsche Bank's U.S.-listed shares Friday morning put downward pressure on market sentiment and the major indexes, before the bank recovered some of its earlier losses. Deutsche Bank closed 3.11% lower Friday, rebounding from a 7% drop earlier in the trading session.

A selloff of shares was triggered after the German lender's credit default swaps jumped, but without an apparent catalyst. The move appeared to raise concerns once again over the health of the European banking industry. Earlier this month, Swiss regulators forced a UBS acquisition of rival Credit Suisse. Deutsche Bank shares traded off their worst levels of the session, which caused major U.S. indexes to also cut their losses.

"I think that the market overall is neither frightened nor optimistic — it's simply confused," said George Ball, president at Sanders Morris Harris. "The price action for the last month-and-a-half, including today, is a jumble without any direction or conviction."

European Central Bank President Christine Lagarde tried to ease concerns, saying euro zone banks are resilient with strong capital and liquidity positions. Lagarde said the ECB could provide liquidity if needed.

Investors continued to assess the Fed's latest policy move announced this week. The central bank hiked rates by a quarter-point. However, it also hinted that its rate-hiking campaign may be ending soon. Meanwhile, Fed Chair Jerome Powell noted that credit conditions have tightened, which could put pressure on the economy.

On Thursday, Treasury Secretary Janet Yellen said regulators are prepared to take more action if needed to stabilize U.S. banks. Her comments are the latest among regulators attempting to buoy confidence in the U.S. banking system in the wake of the Silicon Valley Bank and Signature Bank closures.

Ball said that Deutsche Bank is "very sound financially," noting that the market was "overreacting" in wake of the earlier bank failures.

"[Deutsche] could be crippled if there's a big loss of confidence and there's a run on the bank. There is, however, no fundamental reason why that should occur, other than nervousness."

CORRECTION: This blog has been updated to show that the major indexes all had a winning week, with the Dow gaining 1.2% week-to-date, while the S&P 500 and Nasdaq climbed 1.4% and 1.7%, respectively.

Junk bond ETFs seeing strong demand from investors

Investor's concerns about credit markets after the collapse of Silicon Valley Bank does not appear to haves fully spread to high yield debt just yet.

The iShares iBoxx High Yield Corporate Bond ETF (HYG) has attracted nearly $800 million in inflows over the past week, according to FactSet. Meanwhile, the SPDR Bloomberg High Yield Bond ETF (JNK) has pulled in $381 million.

The inflows have come even as credit spreads have widened, suggesting that there are some investors who are willing to take on the credit risk for higher yields.

— Jesse Pound

There's value in mortgage-backed securities now, says Baird

Baird is looking toward mortgage-back securities as it becomes more bearish on the economy.

"We take the view that a recession is coming, and we think that what's happening in the banking sector increases the odds of recession this year," wrote analyst Ross Mayfield and head of fixed income research Tom Titzouris.

"We'd gone underweight MBS in anticipation that banks would pull away from supporting the market this year, and that's exactly what's happened. As the banking sector has become stressed, they've moved away from activity in the MBS market and spreads have widened out. So, we're seeing some value begin to emerge there," said Mayfield and Titzouris.

"The offset to that underweight in mortgages is our overweight in Investment-Grade (IG) corporate ... Before the cycle matures, spreads will likely widen out and Treasury yields push lower because recession is going to be on everybody's radar as 2023 progresses," they added.

— Hakyung Kim

Banking sector crisis putting downward pressure in other industries, says BTIG

First the banks started to break in February, then it was the real estate investment trusts (which "have now accelerated lower particularly in the office space"), and now it's the turn of insurance, railroad and airline stocks, BTIG chief market technician Jonathan Krinsky wrote in a note to clients dated Thursday.

Krinsky highlighted four insurance stocks that are sitting at or near 52-week lows (Metlife, Chubb, AIG, Prudential) and said the  KBW Nasdaq Insurance Index (KIX) is down about 16% from its February highs.

Meanwhile, for adherents of the Dow Theory, Krinsky noted that railroad stocks were "less than 1% away from their October lows" while airline stocks "are threatening a multi-month breakdown."

Technology is holding up the market , so "if tech fails, as we expect, then [the S&P 500] can quickly unravel lower."

— Scott Schnipper, Michael Bloom

U.S. community and regional banks soon to enter a "period of capital hoarding," according to Third Bridge

Third Bridge analyst Omar Fahmy says that community and regional banks across the U.S. are headed toward a capital hoarding era as net interest margins tighten.

"Our experts say we're entering a period of capital hoarding for many community and regional banks as institutions compete for deposits and look to pull back on lending," Fahmy wrote in a Friday note.

"On average, we anticipate widespread NIM compression amongst regional banks followed by heightened efforts to improve their capital efficiency ratios."

The analyst added that he warns investors "to avoid a situation where commercial property owners opt for foreclosure, regional banks will have to start considering widespread loan modifications." 

 "While loan modifications to commercial real estate debt would relieve short-term pressure on banks and landlords, this would trigger their classification as Troubled Debt Restructuring. This would increase the risk rating of the loan and force banks to hold more risk-adjusted capital that could otherwise be lent," said Fahmy.

— Hakyung Kim

Asset price uncertainty has kicked off in the markets, says Simplify Asset Management

Asset price uncertainty is causing chaos the current chaos in the markets, according to Simplify Asset Management's chief strategist Michael Green.

"I think the biggest thing that's been kicked off here is this dynamic asset price uncertainty, which we haven't seen for a while," said Green.

"A higher cost of capital for financial institutions, in turn, means that many projects, loans or many other components that would have historically been financed, are now suddenly under scrutiny. So that is broadly what I would argue is transpiring. Europe is likely to get hit worse with this than the United States," Green said.

The strategist added that Europe is more dependent upon bank lending compared to unstructured markets than the U.S., in addition to lower overall growth opportunities that make it more vulnerable to volatility.

Green is bearish on his outlook and anticipates more volatility throughout the markets.

"My view has been for a while the Fed is being too aggressive in its rate hikes ... And now we're kind of trapped in what I would describe as a no win environment," he said. "Money is leaving the banking system, [and we're] almost certain to see a credit contraction, particularly in areas in which smaller banks and regional banks play a larger role, in getting l credit cards and things like auto loans and commercial real estate," Green added.

"So if anything, it leaves me much more bearish and would suggest that we'e likely in the early stages of a catch up in other forms of volatility, whether that is foreign exchange or equity volatility, or credit spreads, to what we're seeing in interest rate volatility."

— Hakyung Kim

Stocks making the biggest midday moves

Here are some of the names making the biggest moves midday:

GameStop -- The famed meme stock gained 2.5% in midday trading. The stock has been active since it reported its first profitable quarter in two years earlier this week.

Deutsche Bank  The German lender's U.S.-listed shares slid 5%, bouncing off its lows. The bank stock had been down about 14% after the bank's credit default swaps jumped without an apparent catalyst. JPMorgan defended Deutsche Bank Friday, saying investors should focus on the European bank's "solid" fundamentals.

Regeneron  Regeneron gained 2.2% after Jefferies upgraded the pharmaceutical stock to a buy from hold rating and said its Dupixent drug, in development with Sanofi, could serve as the next big catalyst for the company.

To see more companies making moves during midday trading, read the full story here.

— Brian Evans

Real estate will be the 'next shoe to drop,' Bank of America thinks

The next danger spot for the U.S. financial sector could be commercial real estate, according to Bank of America's Michael Hartnett.

"CRE widely seen as next shoe to drop as lending standards for CRE loans to tighten further," said the bank's investment strategist.

The last Federal Reserve Senior Loan Office Opinion Survey, in January, noted "significant net shares of banks" that reported tightening lending standards for commercial loans. At the same time, the survey noted "weaker demand for loans from firms of all sizes."

This, combined with the Federal Reserve continuing to raise rates, is dangerous as banks undergo a stressful period.

— Jeff Cox

Bullard thinks recent bank stress can be contained

St. Louis Federal Reserve President James Bullard thinks that the central bank can successfully reign in banking sector turmoil while also taming inflation.

Bullard added to earlier comments from Friday discussing the health of the US banking system, and said that the current disruption is less concerning compared to the economic shocks of the Great Financial Crisis in 2008.

"Financial stress can be harrowing but also tends to reduce the level of interest rates," Bullard said. "Lower rates, in turn, tend to be a bullish factor for the macroeconomy."

And because Treasury yields have pulled back in recent weeks, Bullard said that could "help to mitigate some of the negative macroeconomic fallout that might otherwise occur in the aftermath of a period of financial stress."

Indeed, Bullard said, price pressures remain too high for the central bank to be comfortable with. He added that the Federal Reserve has the necessary tools at its disposal to properly address the banking crisis.

— Brian Evans

Deutsche Bank's U.S.-listed shares pull off lows

Deutsche Bank's U.S.-listed shares slid 4.3% during midday trading, pulling off their lows. The bank stock earlier dropped 14% after the German lender's credit default swaps jumped, without an apparent catalyst.

Investor concerns over the health of the European banking industry eased somewhat after European Central Bank President Christine Lagarde said euro zone banks are resilient with strong capital and liquidity positions. Lagarde said the ECB could provide liquidity if needed.

Meanwhile, JPMorgan defended Deutsche Bank, saying Friday that investors should focus on the European bank's "solid" fundamentals.

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Deutsche Bank shares 1-day

— Sarah Min

FANG index on pace for best quarter since 2020

The tech-focused NYSE FANG index is up over 33% quarter-to-date. The index is now on track for its best quarter since the second quarter of 2020, when it gained 37.5%.

Companies leading the rally include NVIDIA, which is up over 83.5%. Meta is another top gainer, gaining 71%. Meta is headed toward its best quarter since the third quarter of 2013, when it gained 101.89%.

— Hakyung Kim, Gina Francolla

Buy this defensive exchange operator, Credit Suisse says

Credit Suisse says investors should consider putting their money in one exchange operator poised to capitalize on volatile market conditions.

"We believe continued transactional growth, improved investor sentiment for defense and elevated Data and Access solutions growth can expand the firm's valuation in 2023," wrote Analyst Gautam, who named the stock the bank's top exchange sector pick.

Read more on the call from Credit Suisse here.

— Samantha Subin

Cathie Wood doubles down on Block, buys $21 million shares

Ark Invest's Cathie Wood doubled down on Jack Dorsey's Block Thursday as the payment company sold off amid a short seller's criticism.

Block dropped nearly 15% Thursday after Hindenburg Research announced a short position, alleging that the company's flagship Cash App facilitates crime and lacks strong compliance controls.

Wood snapped up 275,544 shares of Block for her flagship ARK Innovation ETF Thursday, as well as 45,013 shares for ARK Next Generation Internet ETF and another 17,515 shares for Ark Fintech Innovation ETF, according to Ark Invest's daily trade updates. Those purchases, combined, were worth nearly $21 million, based on Block's Thursday closing price of $61.88. 

— Yun Li

Moody's warns that banking contagion could spread

Dangers are rising that the problems in the banking industry could spread through the broader economy, according to Moody's Investors Service.

The ratings agency said regulators and policymakers "acted swiftly" to address stresses that ensued from several bank failures and reports of problems with others. While Moody's said it generally expects the response to control the liquidity and funding issues, it said that isn't assured.

"In an uncertain economic environment and with investor confidence remaining fragile, there is a risk that policymakers will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector," Atsi Sheth, managing director of credit strategy, and others said in a report.

"The longer that financial conditions remain tight, the greater the risk that stresses spread beyond the banking sector, unleashing greater financial and economic damage than we anticipated in our baseline," they added.

The analysts said the "spillovers" would occur through exposure to troubled banks, heightened risk aversion and policy mistakes.

—Jeff Cox

Gundlach sees ‘red alert’ recession signal

DoubleLine Capital CEO Jeffrey Gundlach said the Treasury yield curve, which is rapidly becoming less inverted, is flashing "red alert recession signals."

He also said the Federal Reserve will be cutting rates substantially soon, even though Chairman Jerome Powell stressed Wednesday that rate cuts are not in the central bank's base case

— Yun Li

Commercial real estate stocks under pressure

Shares of some real estate companies and investment trusts were under pressure again on Friday, as concerns about tighter credit are surfacing for in the commercial office space.

Shares of SL Green Realty dropped more than 3%, while CBRE Group shed nearly 3%. Simon Property Group, which invests largely in retail space, was down more than 1%.

One notable commercial real estate stock bucking the trend was Realty Income, rising nearly 1% and helping to keep sector ETFs like the Vanguard Real Estate Index Fund (VNQ) roughly flat.

— Jesse Pound

Fed's Bullard says policy responses have been 'swift and appropriate'

St. Louis Federal Reserve President James Bullard said Friday that central bank policy should help contain cracks in the financial system.

"Continued appropriate macroprudential policy can contain financial stress, while appropriate monetary policy can continue to put downward pressure on inflation," Bullard said in a presentation.

His comments were similar to sentiments Wednesday from Fed Chairman Jerome Powell, who said interest rate hikes are targeted at inflation while special lending facilities will keep banks liquid.

Bullard called the Fed's actions to the banking problems "swift and appropriate." He also noted that even with the financial tumult, economic data has been stronger than expected and said inflation has "declined recently."

Presentation materials released with Bullard's speech did not indicate a position on where rates should go from here. Markets are pricing in a strong possibility the Fed will not hike when it meets again in May. Bullard is a nonvoting member of the rate-setting Federal Open Market Committee.

—Jeff Cox

Gold on pace to finish week higher

Despite seeing only a modest advance in Friday's session, gold is up 1.4% so far this week. If gold finishes Friday's session above its weekly flatline, it will mark the metal's fourth straight winning week.

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— Alex Harring, Gina Francolla

Stocks open lower Friday

Stocks opened lower Friday as a plunge in shares of Deutsche Bank in Europe raised investor fears about the banking sector once again.

The Dow Jones Industrial Average slid 178 points, or 0.55%. S&P 500 dipped 0.48%, while Nasdaq Composite was 0.22% lower.

— Sarah Min

Jefferies upgrades Regeneron following Dupixent results

Jefferies says it's time to buy Regeneron after results from a recent study showed that its Dupixent drug could potentially treat chronic obstructive pulmonary disease.

Analyst Akash Tewari upgraded the company to buy from hold, saying that use cases for COPD could create a $4 billion opportunity for Regeneron.

Read more on the call from Jefferies here.

— Samantha Subin

Durable goods orders fell 1% in February, more than expected

Demand for long-lasting goods such as appliances, TVs and computers fell more than expected in February, the Commerce Department reported Friday.

Durable goods orders declined 1% for the month, more than the Dow Jones estimate for a 0.3% decline though less than the 5% plunge in January.

Excluding transportation, new orders were unchanged, while orders less defense fell 0.5%.

Stock market futures held losses following the 8:30 a.m. ET data release.

—Jeff Cox

Stocks making the biggest moves premarket

These companies are making headlines in premarket trading:

Read on for more movers here.

— Tanaya Macheel

Atlantic Equities downgrades Block, cites need for more clarity on Cash App

In the wake of Hindenburg Research's short position on Block, Atlantic Equities is getting more cautious on shares.

Analyst Kunaal Malde downgrades shares to neutral from an overweight rating, saying that Cash App's business could suffer if the company truly works to improve risk controls in order to curb illegal activity.

"With valuation remaining high, we believe it is prudent to turn Neutral until we can get more comfort around sizing the exposure to these risk factors," Malde wrote.

The stock slumped 2% before the bell, building on Thursday's roughly 15% drop.

Read more on the call from Atlantic Equities here.

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Block shares fall premarket

— Samantha Subin

Yields fall as bank concerns are reignited

Treasury yields fell sharply Friday, with traders seeking safety as a spike in Deutsche Bank's credit default swaps once again raised concerns over the state of the global banking system.

The benchmark 10-year yield dropped nearly 10 basis points to 3.313%. The 2-year rate slid 17 basis points to 3.635%.

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10-year drops

— Fred Imbert

Deutsche Bank shares fall

U.S.-listed shares of Deutsche Bank dropped more than 5% following a spike in credit default swaps. Credit default swaps — a form of insurance for a company's bondholders against its default — leapt to 173 basis points on from 142 basis points.

The move comes as concerns over the global banking system persisted. Earlier this month, Swiss regulators forces a UBS acquisition of rival Credit Suisse to shore up the country's banking industry.

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DB falls

— Elliot Smith, Fred Imbert

European stocks are lower

European stocks fell in early Friday trade, with the Stoxx 600 index falling 1.2%.

The U.K.'s FTSE 100, France's CAC 40 and Germany's DAX were all down by around 1.4%.

Among sectors, banks plunged 3.2% as a sharp rise in default insurance costs at Deutsche Bank spooked investors and concerns about the stability of the sector returned.

The German bank was down 9% at 9:50 CET.

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Stoxx 600 index.

— Jenni Reid

Japan factory activity growth stays contracted for five straight months

Japan's factory activity for March has risen slightly, but still remained in contraction territory for the fifth straight month, a flash estimate from au Jibun Bank showed.

The manufacturing purchasing managers' index climbed to 48.6 from 47.7 in February, its first rise since March 2022.

A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction in growth.

But the estimate for Japan's services sector came it at 54.2 for March, slightly above the 54.0 print for February, and the strongest reading since October 2013.

— Lim Hui Jie

HKMA says Hong Kong sees little impact from banking turmoil in U.S., Europe

Hong Kong Monetary Authority Chief Executive Eddie Yue said Hong Kong sees "little impact" from the fallout of the global banking sector turmoil.

"I would say that the recent events in the U.S. and Europe has very little impact on Hong Kong," Yue said in a briefing, adding that Hong Kong's banks have "only very limited exposures to all the banks that are now featured in the newspapers" without naming them.

Noting that the situation has "largely stabilized," Yue emphasized that he will be monitoring for potential changes ahead.

"The liquidity has been extended, but whether there will be further changes, we will need to monitor," Yue said. "We, of course, the banks in Hong Kong or the banks around the world will have to get prepared if there should be more volatility coming into the market," he said.

– Vivian Kam, Jihye Lee

Torrid jumps 9% on earnings beat

Direct-to-consumer fashion company Torrid gained nearly 9% after the bell as investors cheered better-than-expected earnings and overlooked underwhelming forward guidance.

Torrid posted an earnings per share loss of 4 cents in the fourth quarter, a smaller drop than the 7 cents expected by analysts polled by FactSet. Comparable store sales were down less than anticipated, while revenue for the quarter came in at $301.2 million compared with the $292.1 million expected by analysts.

Forward guidance from the company did not stack up as well. For the first quarter, adjusted EBITDA was guided to between $35 million and $40 million despite analysts expecting $42.5 million. Torrid said to expect first-quarter revenue to come in between $305 million and $313 million, below the consensus estimate of $314.5 million.

Adjusted EBITDA for the full-year was guided to between $140 million and $152 million, also under the expectation of $153 million. But the company said to expect revenue for the full year between $1.265 billion and $1.32 billion, above the $1.26 billion anticipated.

— Alex Harring

Investor pessimism in latest weekly AAII survey moves closer to 50%

Investor pessimism in the latest weekly survey from the American Association of Individual Investors edged closer to 50%, rising to 48.9% of those polled from 48.4% last week. Bullish opinion improved to 20.9% from 19.2%, while neutral sentiment narrowed to 30.2% from 32.4%.

The survey asks investors what their outlook is for stocks over the next six months, and is regarded as contrarian indicator. High bullish readings are associated with more risk in the market, while high bearish numbers are thought to correlate to less risk.

"Optimism is at an unusually low level for the fifth consecutive week and the 45th time out of the past 64 weeks," AAII said.

Meanwhile, the Investors Intelligence weekly survey of financial newsletter editors found bulls falling to 39.7% from 40.3% last week; bears growing to 28.8% from 27.8%; and the percentage of editors expecting a correction dipping a fraction, to 31.5% from 31.9%.

— Scott Schnipper

Indexes are on pace for winning week with one session left

With just Friday's session remaining in the trading week, the three major indexes are on track to close higher.

The Nasdaq Composite has seen the biggest gain so far this week, up 1.4% as investors bet the end of the Federal Reserve's rate hiking campaign could be near.

Meanwhile, the Dow and S&P 500 are both poised for 0.8% advances this week.

— Alex Harring

Tommy Bahama parent slides after first quarter earnings outlook falls short of expectations

Oxford Industries lost 5.5% in extended trading after the Tommy Bahama, Lilly Pulitzer and Southern Tide parent offered weak first-quarter guidance when reporting earnings.

The company said to expect between $3.60 and $3.80 in earnings per share for the first quarter, under the $4.09 consensus estimate of analysts polled by FactSet. It said to expect between $405 million and $425 million in revenue, while analysts anticipated $411.5 million.

For the full year, Oxford Industries guided per-share earnings to come in between $11.50 and $11.90, in line with analysts' estimate of $11.82. And the company set its expectation for full-year revenue at between $1.62 billion and $1.66 billion, which is above the $1.60 billion anticipated by Wall Street.

Oxford Industries beat the consensus estimates of analysts polled by FactSet for per-share earnings and revenue in the fourth quarter. Revenue came in at $382.5 million against $378.7 million expected, while per-share earnings were 14 cents higher than the estimate at $2.28.

— Alex Harring

Stock futures open up

The three major futures indexes were up as extended trading began.

Dow futures were up 0.2%. S&P 500 futures gained 0.2%, while Nasdaq-100 futures added 0.1%.

— Alex Harring