Stocks on Wall Street closed lower the day before yesterday, at the end of a week full of turmoil, dominated by an emerging crisis in the banking sector, and signs of a possible economic recession, as experts estimate that the US economy will fall into a recession trap within 4 months.
US stock indices ended the trading session the day before yesterday on a decline, with the escalation of concerns related to banks, and before an expected decision by the Federal Reserve. Banking stocks led the losses of “Wall Street”, led by “First Republic”, which fell by 32.8%, and by about 70% this week.
The local bank’s stock recovered during trading last Thursday, following the announcement of a group of major banks to pump deposits worth $30 billion into the First Republic.
banking concern
However, the continuing turmoil associated with the Swiss “Credit Suisse” bank, and the announcement by the “SVB” company, which owns the “Silicon Valley” bank, to file for bankruptcy, contributed to the return of concern about the banking sector. The three main indices ended with losses, with the financial services sector incurring the largest losses among the main sectors on the Standard & Poor’s 500 index. According to preliminary data, the Standard & Poor’s 500 index closed down 43.81 points, or 1.10%, at 3,916.47 points, while the Standard & Poor’s 500 index declined. The Nasdaq Composite rose 87.63 points, or 0.75%, to 11,629.64 points. The Dow Jones Industrial Average lost 386.71 points, or 1.20%, to record 31,858.95 points.
interest rate
Global markets are awaiting the decision of the Federal Open Market Committee, which is the interest rate-setting committee within the US Central Bank, the Federal Reserve, next Wednesday evening, amid speculation by Wall Street experts that the decision will be to raise the interest rate by a quarter of a point. Basis. According to a report published by the American network “CNBC”, expectations regarding the value of the increase that the committee will approve in the interest rate fluctuated rapidly during the past two weeks, and varied between half a basis point and a full basis point.
Despite this, a consensus has emerged among experts that Jerome Powell, chairman of the Federal Reserve, and his cohorts will tend to send a message to markets that they are aware of the current mess caused by the fallout from the collapse of the Silicon Valley bank, but at the same time they must continue Their fight against inflation with more interest rate hikes. Therefore, the decision to raise the interest rate by only a quarter of a basis point seems to be the most likely decision, as it satisfies all fronts, or at least does not anger one of the fronts to an extent that may result in risks that are difficult to contain.
Experts also suggest that the decision to raise the expected interest rate next Wednesday will be accompanied by a statement by the committee that reassures the markets after taking other interest-raising decisions during the coming period.
message to the markets
“They have to do something, or they will lose their credibility,” said Doug Roberts, founder and chief executive of Channel Capital Research. They want to raise the interest rate by 0.25, and send a message to the markets with that hike. Well, but the arrival of this message to the markets as desired by the committee depends on Powell’s comments that he will say to the media after announcing the decision, and I do not think that Powell will talk about a 180-degree shift in the monetary tightening policy, as everyone hopes.
The dollar fell the day before yesterday, with the continued decline in Credit Suisse and First Republic Bank shares, which raised market concerns about the spread of infection to other banks, and increased fears of a recession, due to tightening monetary policies.
The dollar index, which measures the performance of the US currency against 6 major currencies, fell 0.604% as traders await the US Federal Reserve’s two-day monetary policy meeting, which is expected to result in an interest rate increase of a quarter of a percentage point on March 22. The euro rose 0.66%, to $1.0675.
The pound sterling increased 0.70% during trading, to reach 1.2192, while the dollar fell 0.39 against the Swiss franc. The Japanese yen rose 1.48%, to 131.77 yen per dollar. The Australian dollar gained 0.81%, to reach $0.671.
specter of recession
For his part, the founder of the “Double Line” company said that the US economic recession will occur in the next four months, with the emergence of signs of crises in the market.
Jeffrey Gundlach, an analyst who bears the title “King of Bonds”, said on Twitter Space: “With everything that is going on right now, I think the recession will happen within four months at most,” according to what was reported by Reuters.
Gundlach said he had accelerated his predictions about the next recession, due to recent movements in US Treasury yields, against the backdrop of the collapse of Silicon Valley Bank, and concern about the banking system.
