Fed decision, banking collapse and Credit Suisse: what to know this week

Photo of author

March has long been expected to serve as a critical month for the Federal Reserve.

And after giving the central bank a year’s worth of headlines the first two weeks of the month, what investors were expecting from the main event in the coming week finally arrived.

On Wednesday, the Fed will announce its latest monetary policy decision at 2 p.m. ET, with Fed Chairman Jerome Powell set to follow the announcement with a press conference at 2:30 p.m. ET. Along with its policy decision, the Fed will also publish updated forecasts for inflation, unemployment, economic growth and interest rates for the remainder of this year and beyond.

After Powell testified before the Senate Banking Committee on March 7 that the Fed would likely raise rates “more than previously anticipated” in response to stubborn inflation, investors were all but certain the Fed would raise the target range for its benchmark interest rate to 0.50%. Will give On 22 March.

Two days later, a nascent banking crisis cast a shadow over the Fed’s plans. As of Sunday night, March 12, the Fed was part of a government-led backstop of deposits the US financial system. investors are now roughly divided Will the Fed raise rates on Wednesday?

“We still expect the Fed to hike its policy rate by 25 basis points next week, but also convey a less stringent inflation-fighting message than a few weeks ago,” wrote Bob Schwartz, senior economist at Oxford Economics. ” In a note to customers on Friday.

“While the banking crisis will certainly attract attention, we believe is not systemic, but rather a liquidity issue that the Fed can address with its lending facilities,” Schwartz said. “The wildcard move will be the reaction in financial markets, as maintaining financial stability is one of the Fed’s mandates.”

See also  Google hired talent to do 'fake work' and prevent them from working for rivals, claims former PayPal boss, Keith Rabois

FILE – Federal Reserve Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board Building in Washington, Wednesday, Dec. 14, 2022. As the primary regulator of Silicon Valley banks, the Federal Reserve has come under sharp criticism from financial watchdogs and banking experts. (AP Photo/Jacqueline Martin, File)

Last week, government officials, regulators and private sector leaders in the banking world sought to stabilize the US financial system following the rapid collapse of Silicon Valley Bank and the seizure of Signature Bank.

The week’s major development came Thursday afternoon when a consortium of 11 US banking giants announced they would freeze nearly $30 billion in deposits in the First Republic (FRC), which investors and regulators feared was about to fail. The next institution to happen would be

Even with last week’s capital injection, First Republic’s shares plunged more than 70%; The stock fell 33% on Friday alone.

Amid this flurry of news from the banking sector, major US stock indexes ended the week mixed, with the Nasdaq Composite (^IXIC) up more than 4%, the S&P 500 (^GSPC) up 1.4%, and the Dow Jones Industrial Average (^ ^DJI) Logging minor damage.

Financial stocks were hit hard, however, with the KBW Bank Index (^KBX) plunging more than 14% for the week, while the KBW Regional Bank Index (^KRX) shed slightly more than 9%. Since the beginning of March, these indexes have fallen 27% and 17%, respectively.

Over the weekend, US investors turned their eyes to Europe, where the latest report from the Financial Times suggested that UBS (UBS) was nearing a deal to take over Credit Suisse (CS) in a $1 billion deal that would would be worth about $0.27. per share. Shares of trading in New York closed Friday’s session at $2.01.

See also  Aviation Sector Witnessing Strong V-Shaped Recovery, Passenger Growth Will Continue: Jyotiraditya Scindia

While developments from the Federal Reserve and the global banking world will remain top focuses for investors, a spate of economic and earnings reports will capture attention throughout the week.

Current home data from Tuesday and Wednesday morning’s weekly update on mortgage applications will offer readings on the housing sector, which has been an unexpected beneficiary of the banking crisis as Treasury yields fell and mortgage rates plummeted.

Investors will also be keeping a close eye on Thursday morning’s reading on services and manufacturing activities from S&P Global.

On the earnings side, results from Foot Locker (FL) on Monday, Nike (NKE) on Tuesday, Darden Restaurants (DRI) on Thursday will offer updates on the state of the US consumer.


economic calendar

monday, There is no notable data set for the release.

Tuesday: Existing Home Sales, February

Wednesday: MBA Mortgage Application; Federal Reserve Monetary Policy Decisions

Thursday: Initial Jobless Claims; New Home Sales, Feb; Kansas City Fed

Friday: Durable Goods Orders, February; S&P Flash US Composite PMI


income calendar

monday: Foot Locker (FL), Pinduoduo (PDD)

Tuesday: Nike (NKE), GameStop (GME), Tencent Music (TME), AAR Corp. (AIR)

Wednesday: Ollie’s Bargain Outlet (OLLI), Chewy (CHWY), Petco (WOOF), Winnebago (WGO), Steelcase (SCS), Worthington Industries (WOR), KB Home (KBH)

Thursday: General Mills (GIS), Darden Restaurants (DRI), Accenture (ACN), FactSet (FDS)

Friday, No notable companies are expected to report.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance