Wall Street, which had offered itself a nice technical leap yesterday (+0.8% on the DJIA and +2.1% on the Nasdaq), is hesitating greatly before the stock market on Wednesday. The S&P 500 is expected stable, while the Dow Jones loses 0.2% and the Nasdaq advances 0.1%. The trend is therefore one of caution, quite logically, since inflation remains high and the banking crisis does not yet seem to be resolved. On the Nymex, a barrel of WTI crude rose 1.2% to $72.2. The ounce of gold yields 1% to $1,892. The dollar index gained 0.1% against a basket of currencies.
Efforts to find a buyer for the remains of SVB and Signature Bank continue. The Financial Times and Bloomberg reported that major private equity firms were reviewing SVB’s $74 billion loan portfolio. Bloomberg noted that US regulators are seeking interest from potential buyers for Signature Bank. Bloomberg also highlighted how Bank of America recovered more than $15 billion in new deposits amid the turmoil. Other major banks have also taken in billions in new deposits. Washington is stepping up its scrutiny of the situation, with NBC News explaining that Democrats will unveil a bill on Thursday repealing part of the 2018 law that raised the asset threshold for enhanced capital requirements on midsize banks by 50. billion to $250 billion. The New York Times reported that the Department of Justice has opened an investigation into SVB. A senior ‘GOP’ member of the House Financial Services Committee meanwhile broke with his colleagues by calling on the government to temporarily guarantee all deposits in a bid to boost confidence…
The Fed is now considering tougher rules for mid-sized banks, reports Bloomberg. People familiar with the matter said that following the demise of Silvergate Capital, SVB Financial Group and Signature Bank, the Fed was considering tougher capital and liquidity requirements and measures to tighten stress testing. annually, with potential plans to see companies with 100 billion to 250 billion in assets face tougher rules.
Expectations for the path of interest rates have flattened sharply amid the fallout from the SVB affair, although they have been very volatile since Monday. Markets are now pricing around an 86% chance of a 25bp rate hike at the March FOMC meeting (March 22), as well as a 68% chance of a rate hike to a 5bp peak. to 5.25% in May (FedWatch data). The current median federal funds rate has fallen sharply, below 5%. Rate cuts are also on the cards from June, with markets expecting two to three 25 basis point cuts by the end of the year to 4.25-4.5% or 4.5- 4.75%. Opinions of Wall Street economists on the path of Fed rates have also been quite broad. Goldman Sachs economists said they saw no further 25 basis point rise in March, with considerable uncertainty beyond that month. Bank of America analysts stuck to their forecast of a 25bp rate hike for March and a peak rate of 5.25 to 5.5%, saying that if the Fed’s measures to limit bank stress are successful , this would allow it to continue to tighten its policy to a sufficiently restrictive level. Nomura has one of the more dovish outlooks, saying it expects a 25 basis point rate cut this month, as well as an end to the Fed’s balance sheet reduction!
On the economic front in the USA today, many statistics are expected, with in particular at 1:30 p.m. the producer price index for February (consensus +0.3% month-on-month and +5.4 % over one year; +0.4% and +5.2% excluding food and energy). The New York Fed’s Empire State Manufacturing Index for March will be released at the same time (consensus -7.7), along with retail sales for February (consensus -0.1% , +0.1% excluding automotive and -0.1% excluding automotive and gasoline). US business stocks and the housing market index are due at 3 p.m., along with the Atlanta Fed inflation expectations index. The Department of Energy’s weekly US Domestic Oil Inventories report for the week ending March 10 will be released at 3:30 p.m.
