SPX- The smooth landing of the Fed...always possible...
WEEK SUMMARY
Hectic week with its share of news that brought a lot of pain...
Friday
NFP eclipsed…
On Friday, everyone was waiting for the jobs report that was supposed to be the driving force behind the direction of the market… which gave some hints that inflation might be slowing. Payrolls rose more than expected, but investors focused on weaker-than-expected wage growth, which could cause the Federal Reserve to rethink its aggressive stance on rate hikes…
But, turmoil among bank stocks overshadowed a February jobs report…
Shares fell on Friday as tech-focused lender Silicon Valley Bank closed following losses in its bond portfolio, sparking the biggest bank failure since the global financial crisis and sending shockwaves through the sector banking.
$DJIA(.DJI)$ fell for a fourth straight day, ending down 1.07%, to close at 31,909.64. $S&P 500(.SPX)$ lost 1.45% to settle at 3,861.59. $NASDAQ(.IXIC)$ lost 1.76% to end at 11,138.89.
All major averages ended the week with losses. The Dow Jones fell 4.44% to post its worst weekly performance since June. The S&P fell 4.55%, while the Nasdaq lost 4.71%.
Risk-Off...
Regulators took control of Silicon Valley Bank on Friday, after shares fell on Thursday and the bank struggled on Friday to find another company to buy it.
The market would be in the throes of worries about a recession…
This doubt, concern, or rather this fear came from the day before with actions related to the banking sector.
Indeed, on Thursday, stocks gave back early gains and ended the day down sharply.
Banking-related stocks were reportedly the trigger, with $JPMorgan Chase(JPM)$ and Wells Fargo falling 5% and 6%, respectively. Charles Schwab was down almost 13%. Overall, S&P 500 financial stocks fell 4.1% on the day.
But blamed for the slump would be $SVB Financial Group(SIVB)$ , the parent company of Silicon Valley Bank, reported a big loss, triggering the selloff among major U.S. banking stocks.
SVB Financial "said Wednesday evening that it sold securities from its portfolio for a loss of $1.8 billion, while announcing its intention to raise capital through a common and preferred stock offering."
SVB Financial shares plunged 60% on Thursday…
Big loss!
Yet before, the Initial Jobless Claims report was not so bad…showing that the strength of the labor market could start to subside, possibly suggesting that inflation is heading in the right direction…
Initial jobless claims rose to 211,000 in the week ended March 4, according to the Labor Department. That was above the FactSet consensus forecast of 196,000.
Note the reaction of yields to this economic data…
The two-year Treasury note, which was at levels not seen since 2007, stood at 4.9%, down 16.4 basis points from its close on Wednesday. This is the largest one-day drop in yield since Jan. 6.
The two-year Treasury bill reflects the bond market's view of the terminal rate, where short-term rates will settle once the Fed completes its tightening program.
The 10-year Treasury note, more closely tied to the economy and inflation, came in at 3.92%, also down about five basis points.
Wednesday and Tuesday
Powell told Congress that the Federal Reserve plans to raise interest rates several times over the next few months and would be ready to reaccelerate its pace of tightening if necessary…
Powell, who testified before the Senate Banking Committee as part of his semi-annual visit to Capitol Hill, also acknowledged that stronger-than-expected economic data in January suggests “that the ultimate level of interest rates will likely be higher. provided that ".
"If all the data were to indicate that faster tightening is warranted, we would be prepared to accelerate the pace of rate hikes," Powell said. "Restoring price stability will likely require us to maintain tight monetary policy for some time."
Throughout more than two hours of testimony, Powell made it clear that the central bank was on high alert. He defended the Fed's commitment to bringing inflation back to its 2% target and said that while the central bank sees unemployment rising, it's not trying to put people out of work.
The Fed is aware that the full impact of its efforts to the crunch so far has yet to be fully felt, Powell said, adding that he sees no evidence in the economic data that the bank has gone too far. “Indeed, it suggests that there is still work to be done,” he told lawmakers.
MARKET SCENARIO
For a short time, investors reportedly seemed increasingly optimistic that the Federal Open Market Committee (FOMC) would stick to its more dovish approach of a quarter-point rate hike during the meeting at the end of March.
But Fed Reserve Chairman Jerome Powell's speech on Capitol Hill - Semi-Annual Report on Monetary Policy to Congress - may have nipped this optimism in the bud...
The February jobs report released on Friday showed a 311k rise, with economists expecting a 225k increase in nonfarm payrolls, a notable slowdown from January's 517,000 new jobs. Days later, the US Bureau of Labor Statistics will release the February CPI, with forecasters looking for a year-over-year gain of 5.9%, down from the previous 6.4% .
With a major US bank collapse, the biggest bank failure since 2008, this could inevitably spook the market…also fueling investor concerns about whether the contagion is spreading beyond SVB…
US authorities raced on Sunday to stem jitters about the health of the nation’s financial system, pledging to fully protect all depositors’ money following the collapse of Silicon Valley Bank while also giving any banks squeezed for cash easier terms on short-term loans. The Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. jointly announced the efforts, aimed at strengthening confidence in the banking system after SVB’s failure spurred worry about spillover effects. Regulators acted swiftly on a number of fronts to contain the potential fallout after concerns spread Sunday when state regulators closed New York’s Signature Bank.
With these key data points, investors will have no choice but to underscore, once again, the Fed's dependence on incoming data... point fell to 40% from 68% a day earlier, according to futures trading…
AGENDA
Calendar. The United States will switch to daylight saving time this weekend, a fortnight before Europe. Recurring statistics times are advanced by one hour.
The big event of the week are the February inflation figures in the United States on Tuesday, as well as an avalanche of American statistics: producer prices, retail sales and the Empire State index.
On Friday, February Industrial Production and the University of Michigan March Consumer Confidence Index
On the European side, Thursday with a monetary policy decision from the ECB.
SPX LEVELS
Please find the update below. (Last week : Last week)
The key area would remain 4000-4030
3850-3800 lower zone with 3800 in major support
3900-3950-4030-4065 Upper zone with 3900 would be a first resistance
SPX Levels
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