Market Synopsis: Equities mixed, Treasury Yields down, Commodities mixed, Dollar down, Crypto up
Past Week Events:
- CPI, or the consumer price index, which serves as a crucial measure of inflation was released this tuesday. CPI was much anticipated by investors as the Federal Reserves Interest rates decision is next week and it will be very interesting to see how they will try to balance between controlling inflation and stabilizing the economy in the wake of the collapse of SVB. CPI came in at expectations rising 0.4 percent for February. 70% of the rise came at the result of an increase in shelter inflation. The fact that the report came in at expectations led to not a massive reaction from markets.
- PPI or the Producer price index, which provides another measure of inflation, came out this week on wednesday. However, unlike the CPI which provides inflation from the perspective of the consumer PPI provides perspective from the producer or manufacturers of goods and products. PPI unlike CPI came in below expectations. This was a win for the Federal Reserve as the report hinted at easing inflation with a decline of 0.1% for February.
- On Friday the U.S. leading economic index was released. This indicator highlights trends in the broader U.S. economy. The results were not stellar pointing to rough roads ahead for the economy. The index fell for the 10th straight month by 0.3 percent. The causes for the continued decline were weak expectations and factory orders. This reiterated concerns of a potential recession or hard landing.
- The Federal Reserve’s intrest-rate decision will come out. The Federal Reserve has been hiking interest rates for a little while now to combat inflation. Most expect this to continue, but the decision must wait until Wednesday.
- The S&P Global Manufacturing and Services PMI Flashes for the month will be reported. This is an excellent indicator on the United States’ productivity in manufacturing and service sectors. February’s services PMI raised to 50.60 points from 46.80, indicating growth in the services industries. The Manufacturing PMI was still below 50 at 47.30 last month, indicating a possible contraction in the manufacturing sectors. This upcoming report will see if the services industries continues to grow and wether manufacturing can go above 50 points.
Market Snapshot:
- Markets had a chaotic week filled with nearly unprecedented moves in treasury markets and massive liquidity injections. The main themes of the week can be underscored by CPI, PPI, and the crisis facing regional banks and Credit Suisse. CPI and PPI somewhat alleviated concerns regarding inflation and set the stage for the possible beginnings of deflation. These reports were critical in prognosticating what the Federal Reserve will choose to do with rates next week. When it comes to the regional banks, it was pure anarchy and a bloodbath. The Federal Reserve stepped in with a massive liquidity injection to the tune of a few hundred billion dollars. Private banks like JP Morgan, Bank of America, and Morgan Stanley agreed to inject 30$ billion dollars into First Republic Bank a prominent regional bank to support it. All eyes are set on next week’s Federal Reserve’s decision on rates. Will they stand strong an continue to hike rates to bring down inflation to 2% or will they fold and turn the money printers back on and return to the era of massive QE.
Quip of the Week: "Don't bet against the markets; they have a way of frustrating the skeptics."
Ray Dalio
U.S Equities:
Indexes(Week)
SPX 3,916.64(1.43%), DJIA 31,861.98(-0.15%),
NASDAQ 11,630.51(4.41%), RUT 1,725.89(-2.64%)
Sectors
- About half the sectors were in the green while the other half finished the week lower. Interestingly, Tech outperformed all other sectors rising almosts 6% on the week. That would explain the Nasdaq outpacing both the Dow and S&P 500. Unsurprisingly, however, on the other end of the spectrum, the Financial sector tumbled quite significantly about 6%.
Treasuries:
- The treasury market has been fascinating to watch especially with the incredible volatility that hasn’t been seen for many years. The short end specifically the two year treasury declined the most, falling by about 75bps. The longer term treasuries fell substantially less. The extremely aggressive and volatile movements in treasuries come as the result of a potential Federal reserve pivot because of the banking crisis.
Commodities:
Oil
- Oil tubmbeled significantly on the week by about 13.5%. Concerns about an inventory build meaning an increase in supply has driven oil down to about 65$ a barrel which is its lowest since January 2022.
Gold
- Gold has, unsurprisingly, ran up massively over the past week to just under $2000 an ounce. The massive run-up can be attributed quite simply to the fear and uncertainty from the collapse of SVB. As investors pull their money out of riskier investments they have fled to safe haven assets like gold.
BTC -26,954, 34.16% ETH - 1,755.00, 23.05%
- Crypto Currencies as a whole skyrocketed on the week. Concerns with the safety and stability of the banking system have also driven many investors to Bitcoin which they see as a hedge. Bitcoin was up over a whopping 30% on the week touching $27,000, levels that haven’t been seen since June of 2022. Also, questions of a potential Federal Reserve pivot have prompted investors to return to Bitcoin.
Europe:
Stoxx 600- 436.31, -3.84% DAX -14,768 -4.28% FTSE 100 -7,335, -5.33%
Chart of the DAX (5-day)
- This past week has been very negative for the markets, as big banks like Sigantaure Bank and Credit Suisse see some adversity. Credit Suise said on Thursday that they are requesting a 54 billion dollar loan in order to recover from banks runs. In the past couple months customers have reportedly pulled out more than 100 billion dollars out of Credit Suisse. This has caused Credit Suisse’s stock to plummet about -17.63% in the past week. Over the weekend the bank will have meetings to diccuss what decisions have to be made to recover and regain the peoples trust.
Asia:
XJO (Australia)-6,994, -2.10% Shanghai 180 Index-8,426, 0.47% Nikkei 225- 27,333, -2.88%
XJO 5-day Chart
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