MARKET SNAPSHOT: U.S. Stocks Rebound As Deutsche Bank-fueled Selloff Abates--for The Moment
30 September 2016 - 3:34PM
Dow Jones News
By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
U.S.-listed Deutsche Bank shares jump 6%
U.S. stocks climbed in early Friday trade boosted by a jump in
Deutsche Bank AG shares as worries about the bank's balance sheet,
which led to a firm selloff Thursday, subsided somewhat.
The S&P 500 index rose 7 points, or 0.3%, to 2,158 with all
the main sectors trading higher.
The Dow Jones Industrial Average gained 114 points, or 0.6%, to
18,260, while the Nasdaq Composite Index climbed 18 points, or
0.4%, to 5,288.
"Central banks have spent eight years convincing markets that
they would not let another Lehman-type failure. But belief in such
a central bank put, or the buffer that there will be liquidity in a
time of crisis, is dissipating, which is why we are seeing such
volatility because of what's happening to Deutsche Bank," said
Steve Chiavarone, associate portfolio manager at Federated Global
Allocation Fund.
Read: Why a Deutsche Bank bust wouldn't be as bad as Lehman's
(http://www.marketwatch.com/story/why-a-deutsche-bank-bust-wouldnt-be-as-bad-as-lehmans-2016-09-30)
Markets have been hit over the past week after a report that a
possible $14 billion fine by the Justice Department would cripple
Deutsche Bank. The Dow industrials closed nearly 200 points lower
on Thursday
(http://www.marketwatch.com/story/wall-street-stocks-could-struggle-as-euphoria-over-opec-deal-fades-2016-09-29)
after a report that some of the lender's biggest clients were
pulling cash and securities or dialing back trading activity
through the bank
(http://www.marketwatch.com/story/fearful-clients-pull-billions-of-dollars-out-of-deutsche-bank-2016-09-30).
Wall Street's CBOE Volatility index , or "fear gauge," jumped the
most in three weeks
(http://www.marketwatch.com/story/wall-streets-fear-gauge-jumps-the-most-in-3-weeks-on-deutsche-bank-worry-2016-09-29)
at one point in that session.
Read:Deutsche Bank crisis threatens to roil global markets
(http://www.marketwatch.com/story/a-crisis-in-european-banks-threatens-to-roil-global-markets-2016-09-28)
"It is surprising to hear the [German Chancellor] Merkel saying
they will not help Deutsche Bank, but it's also possible she is
saying this to get the U.S. government to rethink the size of the
fine. Everybody knows the cost of allowing a major bank collapse,"
said Chiavarone.
Friday marks the end of the week, month and quarter, and the
S&P 500 is down 0.2%, down 0.5%, and up 3%, respectively, with
one session left to go.
Frankfurt-listed shares of Deutsche Bank (DBK.XE) briefly fell
to their lowest level on record Friday, triggering sharp losses
across European stock indexes. But the German bank's U.S.-listed
shares (DBK.XE) rebounded seemingly after a J.P. Morgan Chase &
Co. report that estimated the fine by Justice Department will be
about $5.4 billion, much lower than earlier reports. U.S.-listed
shares shot up more than 6% Friday, after closing 6.7% lower in the
prior session. Meanwhile, shares traded in Europe pared losses, and
were down slightly.
Deutsche Bank worries: At one point, the German lender's shares
dropped below 10 euros and traded at a record low, following
Thursday's reports that certain clients were reducing exposure to
Germany's largest bank. The concerns about the Frankfurt lender was
a drag on Europe's markets.
The Stoxx Europe 600 index
(http://www.marketwatch.com/story/deutsche-bank-shares-hit-a-record-low-weighing-heavily-on-european-markets-2016-09-30)
fell 0.5%, as banks across the region took a battering.
"While we do not rule out the possibility of a renewed tension
in the financial markets, the amplitude of such scenario is hard to
price in," said Ipek Ozkardeskaya, senior market analyst at
LGC.com, in a note to clients.
"We are already in a low-rate, postcrisis environment as the
result of the 2007-2008 subprime crisis. The financial markets are
certainly not well armored to face another financial crisis,"
Ozkardeskaya said.
Economic docket: Consumers spending was barely changed in August
(http://www.marketwatch.com/story/consumer-spending-softens-in-august-2016-09-30),
while personal income inched and savings rate inched higher.
Inflation also inched up, but remains below the 2% target set by
the Federal Reserve.
Stocks to watch:Costco Wholesale Corp
(http://www.marketwatch.com/story/costco-ernings-get-boost-from-switch-to-visa-2016-09-30).(COST)
reported a surprise jump in earnings, helped by lower credit card
fees after its new deal to accept Visa (V) cards.
Shares of Cognizant Technology Solutions Corp
(http://www.marketwatch.com/story/cognizant-technologys-stock-tumbles-after-disclosure-of-internal-foreign-payments-probe-2016-09-30).(CTSH)
tumbled after the consulting company disclosed an internal
investigation it whether certain payments it made to facilities in
India violated the U.S. Foreign Corrupt Practices Act.
Other markets: Oil prices were stable Friday, with U.S. crude
flat at $47.86 a barrel. The U.S. dollar and gold prices were
unchanged.
Asian markets
(http://www.marketwatch.com/story/asian-shares-rattled-by-concerns-over-oil-deutsche-bank-2016-09-30)
finished largely lower, with the Nikkei 225 index dropping
1.4%.
(END) Dow Jones Newswires
September 30, 2016 10:19 ET (14:19 GMT)
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