The major averages were weaker in early trading after Credit Suisse and Nomura warned that they could be hit with sizable losses from dealings with a U.S. client that had to liquidate. The news weighed on shares of those and some other global banks amid reports that Archegos Capital Management, the family office of Bill Hwang, was the source of block trades selling Chinese tech giants and U.S. media firms on Friday and Monday. The Dow managed to recover and close in the green, helped by strength in Boeing following a big jet order announcement, while the Nasdaq cut its losses but could not avoid finishing in the red.
ECONOMIC EVENTS: In the U.S., the Dallas Fed's March manufacturing index surged 11.7 points to 28.9, which was much better than expected.
TOP NEWS: Shares of Boeing (BA) gained 2% after the company and Southwest Airlines (LUV) announced the carrier will "continue to build its business around the 737 MAX family" with a new order for 100 airplanes and 155 options across two models. Given the new deal, Boeing and its suppliers "could build more than 600 new 737 MAX jets for the airline through 2031," the companies stated.
Credit Suisse (CS) fell 12% after the bank warned that a "significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks," following which Credit Suisse "and a number of other banks are in the process of exiting these positions." Credit Suisse added: "While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month."
Meanwhile, Nomura (NMR) shares trading in New York closed about 14% lower after the bank announced that on March 26 "an event occurred that could subject one of its US subsidiaries to a significant loss arising from transactions with a US client." Nomura said it is currently evaluating the extent of the possible loss and the impact it could have on its consolidated financial results, estimating the amount of the claim against the client is "approximately $2 billion based on market prices as of March 26," but adding that this estimate is "subject to change."
Both of the banks' warnings may be related to the reported liquidation of positions at Bill Hwang's Archegos Capital Management.
In COVID-19 news, the CDC released a study that details following 3,950 health care personnel, first responders, and other essential and frontline workers who completed weekly SARS-CoV-2 testing for 13 consecutive weeks. The study found that "under real-world conditions" messenger RNA, or mRNA, vaccines from Moderna (MRNA) as well as Pfizer (PFE) and BioNTech (BNTX) showed effectiveness of "full immunization" was 90% against SARS-CoV-2 infections regardless of symptom status. The vaccine effectiveness of partial immunization, meaning greater than or equal to 14 days after first dose but before second dose, was 80%, the report added.
MAJOR MOVERS: Among the noteworthy gainers was Humanigen (HGEN), which rose 54% after announcing that its anti-GM-CSF antibody lenzilumab has demonstrated a 54% greater relative likelihood of survival without the need for invasive mechanical ventilation in combination with standard-of-care compared to SoC alone in hospitalized hypoxic COVID-19 pneumonia patients in a Phase 3 study. Also higher was Houghton Mifflin Harcourt (HMHC), which gained 19% after announcing an agreement to divest HMH Books & Media, its consumer publishing business, to HarperCollins Publishers, a division of News Corp (NWSA), for $349M in cash.
Among the notable losers was Celldex Therapeutics (CLDX), which dropped 14% after the company reported interim data from its ongoing, open label clinical trial of CDX-0159 in patients with antihistamine refractory cold contact urticaria and symptomatic dermographism. Also lower was GSX Techedu (GSX), which fell about 19% as the stock was linked to the forced selling that was seen as the cause of several big banks' recent block trading. Citi analyst Mark Li, who upgraded GSX to Buy from Sell this morning, believes the key triggers for the selloff of GSX shares on Friday were fears of government regulation in China's after school tutoring market and selective investors' forced selling.
INDEXES: The Dow added 98.49, or 0.30%, to 33,171.37, the Nasdaq fell 79.08, or 0.60%, to 13,059.65, and the S&P 500 slipped 3.45, or 0.09%, to 3,971.09.
