This week started, and then ended, on a pretty firm note for the stock market. In between, however, there was a bit of volatility as investors weighed ongoing concerns about the bank industry along with the latest policy move from the Fed.
Over the weekend, market participants learned that the Swiss National Bank brokered a UBS (UBS) acquisition of Credit Suisse (CS) for a “takeunder” price of $3.2 billion. The Federal Reserve also announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that “the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”
Also, a Bloomberg report early in the week indicated the Treasury Department is looking at ways to guarantee all bank deposits, if necessary, without congressional approval. This was followed by Treasury Secretary Yellen’s remark in prepared comments for the American Bankers Association that the government is prepared to intervene again “if smaller institutions suffer deposit runs that pose the risk of contagion.”
Many of the recent embattled bank stocks reacted favorably and moved higher in the first half of the week as investors anxiously awaited the FOMC decision on Wednesday, which brought sharp declines at the index level that day.
Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00% and the updated Summary of Economic Projections showed the Fed’s median terminal rate of 5.10% unchanged from December. Stocks initially rallied on this news before taking a sharp turn lower as Fed Chair Powell gave his press conference.
The sell off was hastened by Fed Chair Powell’s acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.
All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.
More central banks followed suit later in the week. The Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and Philippines also hiked their policy rates.
By the end of Friday’s session, price action suggested that the market had shaken off some of the worries that drove downside moves this week. The main indices closed the session higher despite sharp declines in Europe’s major indices on the news that Deutsche Bank’s (DB) cost of default insurance jumped to a four-year high.
The Treasury market also exhibited volatility this week. Ultimately, the 2-yr note yield fell five basis points this week to 3.77% and the 10-yr note yield fell two basis points to 3.38%.
Only two S&P 500 sectors finished the week with declines — real estate (-1.4%) and utilities (-1.2%) — while the communication services (+3.4%), energy (+2.3%), and information technology (+2.0%) sectors saw the biggest gains.
Below are truncated summaries of daily action:
Monday:
The stock market kicked off the new week with a reversal of the money flows that occurred last week. Banks showed nice resilience Monday following news over the weekend that the Swiss National Bank brokered a UBS (UBS) acquisition of Credit Suisse (CS) for a “takeunder” price of $3.2 billion.
Additionally, the Federal Reserve announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that “the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”
Still, some angst around the banking industry persists, evidenced by the material decline seen in shares of First Republic Bank (FRC). The SPDR S&P Bank ETF (KBE), which was up 4.5% at its high Monday morning, closed with a slimmer 1.6% gain and the SPDR S&P Regional Bank ETF (KRE), which was up 4.9% at its best level of the day, had a 1.2% gain by the close.
Shares of First Republic Bank continued to suffer sharp losses today after FRC’s debt was downgraded at S&P to B+ from BB+. There was a short-lived recovery attempt in FRC when The Wall Street Journal reported that JPMorgan Chase’s (JPM ) Jamie Dimon is leading talks with executives at other banks about a deal that could involve converting the previously announced $30 billion in deposits into a capital infusion. Ultimately, however, FRC closed near its worst levels of the day.
There was no U.S. economic data of note on Monday.
Tuesday:
The stock market had a strong showing Tuesday, building on Monday’s pleasing finish for the S&P 500, which closed above its 200-day moving average (3,935). The main indices maintained a position in positive territory throughout Tuesday’s session, led by gains in the bank stocks. With Tuesday’s move, the S&P 500 recouped the entirety of the ground that had been lost since March 8 when the SVB Financial blowup started to hit the scene.
Banking stocks led the positive action after a Bloomberg report indicated the Treasury Department is looking at ways to guarantee all bank deposits, if necessary, without congressional approval. This was followed by Treasury Secretary Yellen’s remark in prepared comments for the American Bankers Association that the government is prepared to intervene again “if smaller institutions suffer deposit runs that pose the risk of contagion.”
Some of the names that had suffered the steepest losses traded up Tuesday, like First Republic Bank (FRC), which was also reacting to reports that it’s pursuing strategic alternatives, including a possible sale. The SPDR S&P Bank ETF (KBE) rose 5.3% and the SPDR S&P Regional Banking ETF (KRE) rose 5.8%.
The S&P 500 pushed above its March 8 close (3,992) shortly after the start of trading before pulling back some and trading in a relatively narrow range throughout most of the session until a late afternoon lift from the mega cap space had the main indices close near their best levels of the day. The S&P 500 closed just above the 4,000 level in front of Wednesday’s FOMC decision.
Reviewing Tuesday’s economic data:
- Existing home sales surged 14.5% month-over-month in February to a seasonally adjusted annual rate of 4.58 million (Briefing.com consensus 4.16 million) versus an unrevised 4.00 million in January. Sales increased on a month-over-month basis in February for the first time in 13 months. Total sales in February were down 22.6% from a year ago.
- The key takeaway from the report is the understanding that the median selling price declined for the first time in 11 years, underscoring the affordability challenges that have been presented by rising mortgage rates and prospective buyers’ misgivings about potentially buying at a cyclical top in the housing market.
Wednesday:
The majority of Wednesday’s session was marked by lackluster action as investors awaited the FOMC policy decision at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. The main indices spent the morning oscillating near their flat lines, sporting only modest gains or losses, but ultimately closed the session sharply lower.
Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00%. In turn, the language of the directive and the Summary of Economic Projections, which showed the Fed’s median terminal rate of 5.10% unchanged from December, made it appear as if the Fed is going to entertain the idea of pausing its rate hikes soon.
That view prompted a knee-jerk, positive reaction in the stock market following the release of the directive; however, the positive price action shifted abruptly as Fed Chair Powell was speaking. Bids disappeared and stock prices fell prone to broad based selling interest that accelerated in the last hour of the session.
That retreat was hastened by Fed Chair Powell’s acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.
All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.
Reviewing Wednesday’s economic data:
- Weekly MBA Mortgage Application Index rose 3.0% with refinancing applications increasing 5.0% and purchase applications rising 2.0%
- Weekly EIA Crude Oil Inventories showed a draw of 1.06 million barrels following a build of 1.55 million
Thursday:
The stock market started the session on a decidedly upbeat note, attempting to recover some of the sharp declines registered Wednesday. The upside momentum started to dissipated, though, after the S&P 500 briefly tipped above the 4,000 level at its high for the day.
Still, the main indices remained in positive territory until an uptick in selling interest without an obvious catalyst dragged the market into negative territory in the late afternoon. Ultimately, the main indices closed in the green, but well off their highs for day, thanks to notable strength in some heavily-weighted components.
Investors were still digesting the Fed’s latest rate hike and commentary from Fed Chair Powell on Thursday along with rate hikes from central banks overseas.
Briefly, the Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and Philippines also hiked their policy rates. The Swiss National Bank also said the country’s bank crisis is over.
Initially, buying interest was broad in nature with mega cap stocks in a leadership position. By the close, most mega cap stocks maintained a leadership position while the broader market deteriorated. The Vanguard Mega Cap Growth ETF (MGK) was up 1.1% versus a 0.3% decline in the Invesco S&P 500 Equal Weight ETF (RSP).
Reviewing Thursday’s economic data:
- Initial jobless claims for the week ending March 18 decreased by 1,000 to 191,000 while continuing jobless claims for the week ending March 11 increased by 14,000 to 1.694 million from last week’s revised level of 1.680 million (from 1.684 million).
- The key takeaway from the report is that initial claims remain at a low level, pointing to little recent change in the health of the labor market.
- Q4 current account balance rose to -$206.8 billion from a revised -$219 billion (from -$217.1 billion).
- New home sales increased 1.1% month-over-month in February to a seasonally adjusted annual rate of 640,000 units from a downwardly revised 633,000 (from 670,000) in January. On a year-over-year basis, new home sales were down 19.0%.
- The key takeaway from the report is that sales activity edged up for the fourth time in the past five months, though the February increase was assisted by a downward revision to the sales total from January.
- Weekly EIA Natural Gas Inventories showed a draw of 72 bcf versus a draw of 58 bcf last week.
Friday:
The stock market closed out the week on an upbeat note, but things didn’t start out that way today. Initially, investors were weighing concerns about the banking industry, again, after reports indicated that Deutsche Bank’s (DB) cost of default insurance jumped to a four-year high.
German Chancellor Scholz and European Central Bank President Lagarde both attempted to calm markets after the DB news, but stocks were still under pressure Friday morning despite their efforts. The S&P 500, which fell below its 200-day moving average (3,932) right after the open, was down 1.0% and hit 3,909 at its low for the day. The Nasdaq and Dow were down 1.0% and 0.9%, respectively, at their lows for the day.
The tone in the market shifted markedly, however, around the time that European markets closed despite Germany’s DAX (-1.7%), the U.K.’s FTSE 100 (-1.3%), and France’s CAC 40 (-1.7%) all registering sharp declines. The tonal shift also coincided with panicky buying interest in the Treasury market subsiding.
Many stocks moved higher with Friday’s rally, which saw the S&P 500 close above its 200-day moving average (3,932). The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.9% while the market-cap weighted S&P 500 had a gain of 0.6%. Even Deutsche Bank, which was down as much as 8.3%, pared its losses to close down 3.1%.
Reviewing Friday’s economic data:
- Durable goods orders fell 1.0% month-over-month in February (Briefing.com consensus 1.6%) following a downwardly revised 5.0% decrease (from 4.5%) in January. Excluding transportation, durable goods orders were unchanged month-over-month (Briefing.com consensus 0.3%) following a downwardly revised 0.4% increase (from 0.7%) in January.
- The key takeaway from the report is that it could invite questions about the strength of the manufacturing sector since it showed an unexpected decrease in headline orders while the January decrease was revised even lower.
- The IHS Markit Services PMI rose to 53.8 in the preliminary March reading versus the prior reading of 50.6. The IHS Markit Manufacturing PMI rose to 49.3 in the preliminary reading versus the prior reading of 47.3.
Source: Briefing Investor
Week in Review: Ends on a positive [March 24-23]
This week started, and then ended, on a pretty firm note for the stock market. In between, however, there was a bit of volatility as investors weighed ongoing concerns about the bank industry along with the latest policy move from the Fed.
Over the weekend, market participants learned that the Swiss National Bank brokered a UBS (UBS) acquisition of Credit Suisse (CS) for a “takeunder” price of $3.2 billion. The Federal Reserve also announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that “the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”
Also, a Bloomberg report early in the week indicated the Treasury Department is looking at ways to guarantee all bank deposits, if necessary, without congressional approval. This was followed by Treasury Secretary Yellen’s remark in prepared comments for the American Bankers Association that the government is prepared to intervene again “if smaller institutions suffer deposit runs that pose the risk of contagion.”
Many of the recent embattled bank stocks reacted favorably and moved higher in the first half of the week as investors anxiously awaited the FOMC decision on Wednesday, which brought sharp declines at the index level that day.
Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00% and the updated Summary of Economic Projections showed the Fed’s median terminal rate of 5.10% unchanged from December. Stocks initially rallied on this news before taking a sharp turn lower as Fed Chair Powell gave his press conference.
The sell off was hastened by Fed Chair Powell’s acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.
All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.
More central banks followed suit later in the week. The Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and Philippines also hiked their policy rates.
By the end of Friday’s session, price action suggested that the market had shaken off some of the worries that drove downside moves this week. The main indices closed the session higher despite sharp declines in Europe’s major indices on the news that Deutsche Bank’s (DB) cost of default insurance jumped to a four-year high.
The Treasury market also exhibited volatility this week. Ultimately, the 2-yr note yield fell five basis points this week to 3.77% and the 10-yr note yield fell two basis points to 3.38%.
Only two S&P 500 sectors finished the week with declines — real estate (-1.4%) and utilities (-1.2%) — while the communication services (+3.4%), energy (+2.3%), and information technology (+2.0%) sectors saw the biggest gains.
Below are truncated summaries of daily action:
Monday:
The stock market kicked off the new week with a reversal of the money flows that occurred last week. Banks showed nice resilience Monday following news over the weekend that the Swiss National Bank brokered a UBS (UBS) acquisition of Credit Suisse (CS) for a “takeunder” price of $3.2 billion.
Additionally, the Federal Reserve announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that “the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”
Still, some angst around the banking industry persists, evidenced by the material decline seen in shares of First Republic Bank (FRC). The SPDR S&P Bank ETF (KBE), which was up 4.5% at its high Monday morning, closed with a slimmer 1.6% gain and the SPDR S&P Regional Bank ETF (KRE), which was up 4.9% at its best level of the day, had a 1.2% gain by the close.
Shares of First Republic Bank continued to suffer sharp losses today after FRC’s debt was downgraded at S&P to B+ from BB+. There was a short-lived recovery attempt in FRC when The Wall Street Journal reported that JPMorgan Chase’s (JPM ) Jamie Dimon is leading talks with executives at other banks about a deal that could involve converting the previously announced $30 billion in deposits into a capital infusion. Ultimately, however, FRC closed near its worst levels of the day.
There was no U.S. economic data of note on Monday.
Tuesday:
The stock market had a strong showing Tuesday, building on Monday’s pleasing finish for the S&P 500, which closed above its 200-day moving average (3,935). The main indices maintained a position in positive territory throughout Tuesday’s session, led by gains in the bank stocks. With Tuesday’s move, the S&P 500 recouped the entirety of the ground that had been lost since March 8 when the SVB Financial blowup started to hit the scene.
Banking stocks led the positive action after a Bloomberg report indicated the Treasury Department is looking at ways to guarantee all bank deposits, if necessary, without congressional approval. This was followed by Treasury Secretary Yellen’s remark in prepared comments for the American Bankers Association that the government is prepared to intervene again “if smaller institutions suffer deposit runs that pose the risk of contagion.”
Some of the names that had suffered the steepest losses traded up Tuesday, like First Republic Bank (FRC), which was also reacting to reports that it’s pursuing strategic alternatives, including a possible sale. The SPDR S&P Bank ETF (KBE) rose 5.3% and the SPDR S&P Regional Banking ETF (KRE) rose 5.8%.
The S&P 500 pushed above its March 8 close (3,992) shortly after the start of trading before pulling back some and trading in a relatively narrow range throughout most of the session until a late afternoon lift from the mega cap space had the main indices close near their best levels of the day. The S&P 500 closed just above the 4,000 level in front of Wednesday’s FOMC decision.
Reviewing Tuesday’s economic data:
Wednesday:
The majority of Wednesday’s session was marked by lackluster action as investors awaited the FOMC policy decision at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. The main indices spent the morning oscillating near their flat lines, sporting only modest gains or losses, but ultimately closed the session sharply lower.
Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00%. In turn, the language of the directive and the Summary of Economic Projections, which showed the Fed’s median terminal rate of 5.10% unchanged from December, made it appear as if the Fed is going to entertain the idea of pausing its rate hikes soon.
That view prompted a knee-jerk, positive reaction in the stock market following the release of the directive; however, the positive price action shifted abruptly as Fed Chair Powell was speaking. Bids disappeared and stock prices fell prone to broad based selling interest that accelerated in the last hour of the session.
That retreat was hastened by Fed Chair Powell’s acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.
All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.
Reviewing Wednesday’s economic data:
Thursday:
The stock market started the session on a decidedly upbeat note, attempting to recover some of the sharp declines registered Wednesday. The upside momentum started to dissipated, though, after the S&P 500 briefly tipped above the 4,000 level at its high for the day.
Still, the main indices remained in positive territory until an uptick in selling interest without an obvious catalyst dragged the market into negative territory in the late afternoon. Ultimately, the main indices closed in the green, but well off their highs for day, thanks to notable strength in some heavily-weighted components.
Investors were still digesting the Fed’s latest rate hike and commentary from Fed Chair Powell on Thursday along with rate hikes from central banks overseas.
Briefly, the Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and Philippines also hiked their policy rates. The Swiss National Bank also said the country’s bank crisis is over.
Initially, buying interest was broad in nature with mega cap stocks in a leadership position. By the close, most mega cap stocks maintained a leadership position while the broader market deteriorated. The Vanguard Mega Cap Growth ETF (MGK) was up 1.1% versus a 0.3% decline in the Invesco S&P 500 Equal Weight ETF (RSP).
Reviewing Thursday’s economic data:
Friday:
The stock market closed out the week on an upbeat note, but things didn’t start out that way today. Initially, investors were weighing concerns about the banking industry, again, after reports indicated that Deutsche Bank’s (DB) cost of default insurance jumped to a four-year high.
German Chancellor Scholz and European Central Bank President Lagarde both attempted to calm markets after the DB news, but stocks were still under pressure Friday morning despite their efforts. The S&P 500, which fell below its 200-day moving average (3,932) right after the open, was down 1.0% and hit 3,909 at its low for the day. The Nasdaq and Dow were down 1.0% and 0.9%, respectively, at their lows for the day.
The tone in the market shifted markedly, however, around the time that European markets closed despite Germany’s DAX (-1.7%), the U.K.’s FTSE 100 (-1.3%), and France’s CAC 40 (-1.7%) all registering sharp declines. The tonal shift also coincided with panicky buying interest in the Treasury market subsiding.
Many stocks moved higher with Friday’s rally, which saw the S&P 500 close above its 200-day moving average (3,932). The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.9% while the market-cap weighted S&P 500 had a gain of 0.6%. Even Deutsche Bank, which was down as much as 8.3%, pared its losses to close down 3.1%.
Reviewing Friday’s economic data:
Source: Briefing Investor
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