Stocks tumbled last week as investors reconsidered their interest rate expectations after Fed Chair Powell’s Congressional testimony that rates may need to go higher. Stocks also were rattled when a west coast bank was placed into receivership on Friday following a run on deposits.
The Dow Jones Industrial Average dropped 4.44%, while the Standard & Poor’s 500 lost 4.55%. The Nasdaq Composite index fell 4.71% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.37%.1,2,3
Rate Fears, Bank Scare
Congressional testimony on Tuesday by Fed Chair Jerome Powell that interest rates may require a higher increase faster than planned unnerved investors, dimming the hopes of any pause in rate hikes this summer. After stabilizing the following day, stocks trended lower as the financial sector came under pressure. The lower move was triggered by a specialty bank's liquidity issues, though regional and money center banks could not escape the selling.
Labor market strength in a Friday report exacerbated rate-hike anxieties, though cooling wage gains balanced an above-consensus new jobs number. Markets appeared to take the employment report in stride but fell on worries arising from the shutdown of a tech-centric bank.4
Powell’s Congressional Testimony
Fed Chair Powell last week testified on Capitol Hill during which he acknowledged that the economy was running hotter than he had expected. He said that labor market strength and stubbornly elevated inflation may require the Fed to raise rates quicker than anticipated and above levels previously contemplated.
The market did not respond well to Powell’s change of tone. Many now see the potential of a 0.50% rate hike coming out of the Federal Open Market Committee’s (FOMC) March 21-22 meeting instead of the expected increase of 0.25%. Powell did say that the FOMC would consider the monthly employment report released last Friday and upcoming inflation reports before arriving at a decision.
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: Producer Price Index (PPI). Retail Sales.
Thursday: Jobless Claims. Housing Starts.
Friday: Industrial Production. Consumer Sentiment. Index of Leading Economic Indicators.
Source: Econoday, March 10, 2023
This Week: Companies Reporting Earnings
Wednesday: Adobe, Inc. (ADBE), Lennar Corporation (LEN).
Thursday: FedEx Corporation (FDX), Dollar General Corporation (DG).
Source: Zacks, March 10, 2023
Be Vigilant & Protect Yourself From Texting Scams
Unfortunately, instances of IRS-themed text scams are on the rise, and these scam attempts could put your sensitive tax data at risk. Most of these scam messages look like they’re coming from the IRS and have fake messages to lure you into providing information for things like COVID relief or tax credits. They may also ask for your information to help you set up an IRS account online.
Be aware of these scams to protect yourself and your data. Remember, the IRS does not send emails or texts asking for personal or financial information. If you receive a text like this, report it to the IRS by emailing email@example.com.
Tip adapted from IRS.gov5
You need to park a car for the weekend. You find a parking space marked “2-Hour Parking M-F, 8am-6pm” with no other restrictions. You call the city and find that overnight parking is allowed on this block. So, what is the maximum amount of time you can leave your car in this space without getting a ticket?
Last week’s riddle: We know that a seahorse isn’t a horse, and we know that a silverfish isn’t a fish. For that matter, a snakehead isn’t a snake – but what is it? Answer: A predatory fish found in both Asia and Africa.
Footnotes and Sources
2. The Wall Street Journal, March 10, 2023
3. The Wall Street Journal, March 10, 2023
4. The Wall Street Journal, March 10, 2023
5. IRS.gov, October 11, 2022
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