Monday, March 27, 2023

Mixed signal on Wall Street: confidence doubts keep Dow Jones under pressure

Wall Street futures will show a mixed opening in the session on Monday after suffering the most severe penalty on Friday. Plans by H and other US banking authorities to support the decoction of SVB depositors are not enough to fully reassure investors, with the financial sector recording declines and weighing on the floor.

Futures linked to the JONES DOW index fell 0.11% to 31,873 points, while those of the S&P D managed to rise 0.15% to 3,868 points. NASDAQ 100 futures advanced 0.87% to 11,931 points.

After these cases, the financial sector is once again in the eye of the storm despite H’s efforts to avoid contamination in the case of SVB Financial. To avoid the risk of spreading throughout the US and the financial world, the US authorities announced that all bank deposits are guaranteed by the state, including those that exceed 250,000 dollars (234,000 coins), which is formally the maximum that the authorities cover. .

At the same time, the Federal Reserve announced the establishment of an emergency lending program, with the approval of the Treasury Department, to provide additional funds to banks in need. Backed by $25 billion in cash from a fund initially designated for currency stabilization but now regularly used to support federal aid programs in times of crisis, the program will provide loans of up to one year to banks, savings banks, credit unions, and others. institutions have deposited in exchange for US Treasury bonds, the agency’s debt, backed by mortgage collateral.

“We’re going into the weekend as a very binary event. Either 100% of uninsured depositors were going to be supported, or they weren’t,” said Peter Boockvar, chief executive officer at Bleakley Financial Group, with references to CNBC. However, “it is not necessarily the answer to the problem of what happens from now on in terms of economic impact” [de] banks that are going to arrange deposit rates across the board”. “The outlook is that I’m more concerned about banks’ earnings than their balance sheets.”

For now, the truth is that these plans have not convinced investors enough, with First Republic Bank leading the bank’s fall in Monday’s shares with a 70% drop in pre-opening operations, after falling 33% last week. PacWest Bancorp fell 37%, and Western Union Bancorp plunged 29% pre-open. Zion Bancorp lost 11%, while Keycorp fell 10%.

The fear also extends to the big Wall Street banks, although to a lesser extent: Bank of America falls more than 3% in the first opening, while Citigroup falls 1.32% and JPMorgan Chase 0.85%. The latter looks at how Wells Fargo analysts revised their value proposition.

On the other hand, investors are looking forward to more macroeconomic outlooks during the week. Tuesday’s consumer price index (CPI) is the next major inflation data released before the next Federal Reserve meeting, which ends on March 22. Sales figures for February and the producer price index will also be published in the coming days.

Until now, the market was waiting to see whether H would raise interest rates by 50 or 25 points at the March meeting, but the latest events force us to rethink our mental outlook. For example, Goldman Sachs no longer sees a case for federal support to raise rates at the March meeting of the Federal Market Committee (FOMC), economist Jan Hatzius said in a note on Sunday.

“In light of the stress in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” Goldman Sachs said in a note. Hatzius and economists together added that they still expect an increase of 25 basis points in May, June and July, recalling the expectation of the statement of terms of 5.25% to 5.5%.

This change in scenario is clearly seen in the fixed income market, always very sensitive to financial changes. The yield on the benchmark ten-year bond fell 14 points to 3.5562%. Even stronger is the drop in the two-year yield, from 31 points to 4.2739%. A few days ago, it was over 5%.

In the interest markets, oil prices are starting the week lower after expectations of increased demand for black gold from China more than offset fears of a new financial crisis. A West Texas barrel fell 1.47% to $75.55, benchmark Brent Oil Futures in Europe fell 1.25% to $81.61.

The euro against the dollar recovers 0.16%, until the exchange rate is set at 1.0659 dollars for each currency community.

Nation World News Desk
Nation World News Desk
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