March 20: Monday Market Report

After last week’s drama surrounding SVB bank, another banking crisis loomed this past week surrounding a 144-giant, Credit Suisse. The Swiss bank has been facing turmoil and problems for a while now. Last week, UBS bought out Credit Suisse in a CHF3.3B deal, shocking employeees in a swift move that also reduces investments and shores up banking inside the company. Credit Suisse’s $17B in bonds is now considered worthless. The Swiss government will backstop losses on CHF9B in assets purchased by the bank. To support the UBS takeover of Credit Suisse, SNB or Saudia National Bank, offers $100B in liquidity to UBS. Yet another bank, First Republic, is showing major signs of distress, despite a $30B bailout, resulting in a drop in their credit rating by the S&P. Several regional banks seem unable to withstand the drops in investment portfolios and loan books. These banking crises have roiled up markets, fueling strong concerns about the health of the global financial system. This stress in the banking system is expected to create a rough end to the bear markets in the United States, according to Morgan Stanley’s Michael Wilson. Banks are expected to tighten up lending rules. The reduction in available credit offered out by banks will in turn be expected to squeeze out growth from the economy. Central banks also announce measures to improve US dollar liquidity.

Earnings estimates are expected to go down as a result. Even the Oracle of Omaha, Warren Bufffet has stepped in to give advice to President Biden upon the President’s request. Will other banks be affected? Is the Fed still going to raise interest rates? We explore these questions and more on Twitter and right here in our new weekly blog post, Monday Market Report.

Consensus around an interest rate hike of 25bp is expected, according to FedWatch. Investors are keen to hear Federal Reserve chairman Jerome Powell’s decision by March 22. At that time, the Fed will also share a Statement of Economic Projections (SEP) with forecasts for stickier inflation.

Many large employers continue to slash their workforces. Amazon has reduced yet another 9,000 staff from its AWS and Twitch services. All in all, the company has removed 18,000 workers since November.

Despite the angst surrounding the banking industry and some initial wobbling, the S&P 500, Dow Jones, Nasdaq and Russell 2000 all posted gains.

Have a great week ahead!

Data for this report has been compiled from Yahoo! Finance, WSJ, FactSet, Bloomberg, FedWatch, Financial Times, and Reuters.

Feb 20: Monday Market Report

A Quick Look at the Economic Pulse

Note: This is the first Market Report we are putting out at Elf. We aim to deliver this weekly every Monday going forward.

Defying expectations, consumers continue to buy with retail sales jumping, despite inflation and interest rate hikes. More insights on consumer spending will be clear when Walmart $WMT and Home Depot $HD post results on Tuesday.

Retail investors pour into equities, while institutional investors remain bearish and dump $19B (over the year so far) into corporate bonds, according to the Financial Times.

Eyes are focused on the Federal Reserve’s Personal Consumption Expenditures (PCE) price index, which shows how closely how quickly prices are rising across the economy. This report comes out Friday morning. The Core PCE is expected to go up 0.4%, just a bit from from December at 0.3%. Prices in January most likely went up 0.5%, according to data compiled by Bloomberg.

Other metrics of interest include the Consumer Price Index (CPI) out last week that showed inflation picked up in January, while cooling only slightly over the year to 6.4%.

On Friday, the Dow Jones and S&P 500 were both down, while the Nasdaq was up. The road has been bumpy in terms of price stability, but strong economic data from jobs to consumer spending have kept a recession at bay.

Both Goldman Sachs and Bank of America analysts expect another rate increase, potentially in March to offset inflation by the Federal Reserve.

The stock and bond market at home will be closed today (Monday) for President's Day. Brick and mortar banks, all government agencies, public libraries and the post office are closed. Most big box retailers and grocery stores will be open.

Upcoming earnings reports this week led by Walmart, also include: Home Depot, Alibaba Keurig, Dr Pepper, Live Nation, Moderna, PG&E, and Warner Bros. Discovery.

Data for this report has been compiled from Yahoo! Finance, WSJ, FactSet, Bloomberg, and the Financial Times.