U.S. stock futures were sharply lower Wednesday morning as two economic prints showed a slowdown in February, coupled with fresh turmoil at Credit Suisse (CS) that weighed on sentiment. Futures tied to the S&P 500 (^GSPC) and futures with the Dow Jones Industrial Average (^DJI) plunged 1.6%. Contracts with the technology-heavy Nasdaq Composite (^IXIC) fell 1.3%. Bond yields fell. The yield on the benchmark 10-year U.S. Treasury note moved down to 3.5% Wednesday morning from 3.6% Tuesday. On the front end of the yield curve, two-year yields fell to 3.9%. Trading volumes for bonds remain elevated as uncertainty around the Fed has increased and investors remain wary of another “unknown unknown” arising, wrote the US Market Intelligence team at JPMorgan. All three major indexes rallied Tuesday as crucial inflation data came in line with expectations. The S&P 500 closed up 1.7%, while the Nasdaq climbed 2.3%, marking the index's best day in five weeks. Shares of regional banks rebounded, clawing back some of the recent losses. But fresh troubles at Credit Suisse injected more jitters into markets Wednesday. The European bank's stock fell more than 20%, plunging to a record low after its biggest backer said it could not provide any more assistance. Credit Suisse on Tuesday disclosed in a report that it had identified "material weaknesses" in controls over financial reporting. Still, on the economic data side, the Commerce Department said retail sales fell 0.4% over the last month, in line with the economist consensus complied by Bloomberg. Meanwhile, February’s producer-price index, which measures what suppliers are charging businesses, also dropped 0.1% in an unexpected decline. Wednesday's data came after Tuesday's release of the closely watched Consumer Price Index (CPI), which the Commerce Department said rose 6.0% in February over the last year, the smallest increase since September 2021. In the same survey, core CPI, which strips out food and energy, grew 5.5%, also in line with expectations. The sudden collapse of Silicon Valley Bank and Signature Bank, as well as the emerging turmoil at Credit Suisse, comes at a time when the economy grapples with stickier, if declining, inflation. It has sparked the debate among traders betting on whether or not the Fed will hike interest rates after its meeting next week. Ryan Sweet, Chief US Economist at Oxford Economics, said as stress is contained mostly in regional banks, his team expects a quarter-percentage-point rate increase following the Fed’s upcoming March meeting. “With inflation continuing to run well above the 2% target, a pause in the tightening cycle or a rate cut would be premature,” Sweet wrote. “Policymakers can use tools other than interest rates to alleviate pressures in the banking system.” A similar sentiment came from William Blair’s macro analyst Richard de Chazal, who said in light of current events a quarter-point increase will probably be deemed “more prudent.” The banking sector isn’t out of the woods — Moody’s on Tuesday downgraded the entire U.S. sector’s outlook from stable to negative, citing “the rapid deterioration in the operating environment.” Bank sentiment rebounded Tuesday for members of the KBW Bank index (^BKX), as the index rose nearly 3%. Large-cap index members including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all traded down Wednesday, however. It’s a mixed picture for regional bank stocks on Wednesday — First Republic Bank (FRC) and Western Alliance Bancorporation (WAL) are up in premarket trading. PacWest Bancorp (PACW), Regions Financial (RF), and Zions Bancorporation (ZION) traded downward. Most Asian stock markets rose on Wednesday, helped by a recovery in bank shares amid easing fears over a potential crisis in the U.S., while growing bets that the Federal Reserve will adopt a less hawkish stance also aided sentiment. Regional markets took positive cues from an overnight recovery on Wall Street, after consumer inflation data read largely as expected for February. The data, coupled with recent pressure on the banking sector, spurred bets that the Fed will have limited room to hike interest rates. Technology-heavy bourses gained the most, with Hong Kong’s Hang Seng index and South Korea’s KOSPI up more than 1% each on Wednesday. The two were also among the worst hit by a stock rout earlier this week. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes added 0.4% and 0.7%, respectively, as mixed economic data showed that a recovery in the country was gaining steam, albeit at a staggered pace. Japan’s Nikkei 225 index rose 0.2%, as major bank stocks recovered, while Australia’s ASX 200 index added 0.7% on a recovery in the country’s big four banks. Australian mining stocks were also supported by the prospect of a Chinese economic recovery. Crude oil prices fell to their lowest in 15 months on Wednesday, on a combination of lackluster data from China and fears that signs of stress in the financial sector could hurt the global economy in the coming months. WTI Crude futures fell to an overnight low of $70.03 a barrel after figures showing that Chinese industrial output in the first two months of the year grew only 2.4% from a year earlier, below expectations. That represents an anemic start to what is expected to be a strong year from a sector that has accounted for a large chunk of world oil demand growth in recent years. By 08:30 ET they had recovered to $70.28, down 1.5% on the day. Brent was down 1.6% at $76.25 a barrel. Gold prices edged lower on Wednesday after falling from a six-week high in the prior session, as a mixed reading on U.S. inflation brewed some uncertainty over the Federal Reserve’s stance on monetary policy, while concerns over a banking crisis in the country persisted. Spot gold fell 0.1% to $1,902.18 an ounce, while gold futures sank 0.3% to $1,905.90 an ounce by 20:04 ET (00:04 GMT). Both instruments fell about 0.5% in the prior session.
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