Marketbites: Banking Regulators Roll Out Emergency Measures
Portfolio Manager Commentary:
The S&P 500 inched up Monday as traders assessed a plan to backstop all the depositors in failed Silicon Valley Bank and make additional funding available for other banks. Some bet the financial shock could cause the Federal Reserve to pause interest rate hikes. The Cboe Volatility index (VIX), Wall Street’s preferred fear gauge, reached a level not seen since late 2022 and neared territory considered highly risky. Meanwhile, treasury yields tumbled Monday, helping to lend some support to equities.
Bank stocks remained under pressure following last week’s slide, with JPMorgan Chase and Citigroup falling. Regional banks fell even more, led by a drop of more than 61% in First Republic.
Traders are pricing in about 2-to-1 odds that the Fed raises its benchmark borrowing rate by 0.25 percentage point at the March 21-22 meeting. Goldman Sachs has gone even further, saying it no longer expects the Federal Reserve to hike rates at its meeting next week. “This news really is really a deflationary shock that the Fed has to consider,” said Gina Bolvin, president of Bolvin Wealth Management Group. “It’s definitely a game changer.”
February’s consumer price index, the next data point to be released that can provide insight into the path of inflation, is slated to come out this morning.
Chart of the Day:
Energy prices are disrupting the global economy for the second time in a year. This time, it’s good news. Plunging oil and natural-gas prices are pumping up economic growth, putting money into consumers’ pockets, boosting confidence and easing pressures on government budgets. It is the reverse of the energy- price shock a year ago, when Russia’s invasion of Ukraine raised concerns about a deep recession in Europe and beyond. Declining energy prices go some way toward explaining this year’s unexpectedly strong economic data in the U.S. and Europe, economists say.