Mid-Week Market Minute 3.15.23

Markets React to Bank News; Latest Inflation Data

Stocks were lower this week in volatile trade following the collapse of Silicon Valley Bank and Signature Bank. Following a short-lived recovery on Tuesday, the markets pared gains on Wednesday as attention turned to the Swiss bank Credit Suisse. Shares of the troubled Credit Suisse reached all-time lows after the Saudi National Bank reported it no longer would be able to provide further financial assistance to the bank. This comes after Credit Suisse said earlier this week it had found “certain material weaknesses in our internal control over financial reporting” for the years 2021 and 2022.

On the economic front, inflation data for both the Consumer Price Index (CPI) and the Producer Price Index (PPI) was reported on Tuesday and Wednesday. For February, headline CPI rose 0.4% for the month and 6% on an annualized basis, in line with consensus expectations. Producer prices, which track the prices received by producers for goods and services, increased at an annualized rate of 4.6%, compared to expectations for an increase of 5.4%.

Looking ahead to the remainder of the week, we expect to see elevated volatility in both stocks and bonds as investors assess the health of the U.S. banking system. Next week, all eyes will be on the March 21-22 Federal Reserve meeting. Just last week, the markets were pricing in the potential for a 0.50% (50 basis point) rate hike. The markets now are split between the chance of a 0.25% increase and no increase in rates at all. Furthermore, futures markets now are pricing in a much lower peak funds rate of about 4.75-5% according to futures markets.

Source: GSAM, CNBC, JPMorgan

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