Amid the reverberations of two U.S. banks being taken over by regulators and the spread of uncertainty to European banks, stocks trended higher last week on the strength of the technology sector.
The Dow Jones Industrial Average was flat (-0.15%), while the Standard & Poor’s 500 rose 1.43%. The Nasdaq Composite index picked up 4.41%. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 3.12%.1,2,3
Stocks Gain Despite Banking Woes
Stock prices gyrated as investors wrestled with banking troubles that appeared to spread to Europe. Worries of financial instability rocked financials and sent bond yields falling. While the rush into Treasuries was expected, the dash into technology stocks was a surprise. Falling yields made the high-growth names more attractive, though investors targeted their buying in high-quality companies that offered defensive characteristics, such as profits, healthy cash flows, and strong balance sheets.
When Switzerland’s central bank provided a lifeline to a troubled Swiss bank, and a group of U.S. banks provided aid to a struggling regional bank, stocks powered higher on Thursday. Banking jitters, however, returned on Friday, closing out a tumultuous week and paring some of the week’s gains.
Less than two weeks ago, Fed Chair Jerome Powell testified interest rates might have to be hiked higher and faster. Since then, two U.S. banks were placed in receivership, sparking worries of financial instability and changing the market’s outlook on future rate hikes.
The question now is if the Fed will hike short-term rates at all. By Thursday, traders saw an 18.1% probability of no rate increase at the March Fed meeting, which concludes this Wednesday. Just a week ago, it was a 0% chance. Traders also see a 0% chance of a 50 basis point rate increase in March. A week earlier, there was a 68.3% probability. Where the market previously saw little likelihood of a rate cut this year, the probability of a rate cut by July was 63.7% by Thursday.4
This Week: Key Economic Data
Tuesday: Existing Home Sales.
Wednesday: FOMC Announcement.
Thursday: Jobless Claims. New Home Sales.
Friday: Durable Goods Orders. Purchasing Managers’ Index (PMI) Composite Flash.
Source: Econoday, March 17, 2023
This Week: Companies Reporting Earnings
Tuesday: Nike, Inc. (NKE).
Thursday: General Mills, Inc. (GIS), Darden Restaurants, Inc. (DRI).
Source: Zacks, March 17, 2023
5 Things You Can Find on IRS.gov
The IRS website has a wealth of information outside of just tax filing information. Here are some things you can find on the site that might help you as a taxpayer:
*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
Five girls took part in a bicycle race. Barbara finished before Vicki but behind Susan. Katarina finished before Sara but behind Vicki. In what order did they finish?
Last week’s riddle: 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? Answer: 66 hours. You can park from 4pm Friday until 10am Monday.
Footnotes and Sources
2. The Wall Street Journal, March 17, 2023
3. The Wall Street Journal, March 17, 2023
4. CME FedWatch Tool, March 16, 2023
5. IRS.gov, September 26, 2022
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The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
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Weekly Market Insights: Markets Cautious After Banking Woes; Awaiting Fed Reaction
March 20, 2023