Daily Market Notes: 3-16-2023

After Tuesday’s late comeback, the market got sideswiped once again by another banking disaster, and this time the bad news came from Europe as Credit Suisse collapsed to a new low with a decline of 24% following reports that its top shareholder, namely our good friends from Saudi Arabia said that they will not pump more money into its investment. The bank has been fighting troubles for years, including losses it took related to the 2021 collapse of investment firm Archegos Capital. But the market did trim is losses toward the end of the session as the Swiss National Bank said it could provide some assistance to Credit Suisse “if needed.”

This came after the Dow fell to a loss of a large 726 points at 1pm but then fought back to finally end with a closing decline of 280 down to 31,874 led by selling once again in the financial issues such as AXP, GS, JPM, TRV in addition to BA, CAT and HON.

The S&P also plunged to a large decline of 81 at the same time before also recovering a good part of the loss to end off at a 27 point loss to 3891. The Nasdaq did the best as it turned a decline of 190 into a gain of 6 up to 11,434 led by some gains in technology issues perhaps benefitting from the sharp drop in interest rates this week, with MSFT, META and NFLX leading the upside.

The Russell 2000 Index of small stocks did the worst with a 31 point additional beating down to 1746 as the small regional banks, which put in a relief rally from yearly lows on Tuesday, fell back down again as the smaller and midsize banks dropped because they are seen as more at risk of having customers try to pull their money out en masse. Larger banks also fell, but not by quite as much.ps into Fed Chair Powell over bank failures

Sen. Elizabeth Warren, D-Mass., blasted Fed Chair Jerome Powell on Wednesday over the bank runs involving Silicon Valley Bank and Signature Bank.

nds of 4 minutes, 6 secondsVolume 90%

It does appear that the current weakness for banks looks nowhere near as bad as the 2008 crisis that torpedoed the global economy. But worries are nevertheless rising that pain spreading through the banking system could spark a downturn. This was illustrated by the price of crude oil falling to as low as $66 a barrel for the first time since late 2021. I do not see what is negative about this as it does certainly help in the fight against inflation and acts like sort of a tax cut because it costs less for consumers to fill up their gas tanks and heat their homes as we come to the end of the heating oil season.

Much of the damage for banks is seen as the result of the Federal Reserve’s fastest barrage of hikes to interest rates in decades. The Fed has pushed the funds rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in hopes of driving down painfully high inflation.

Some of this week’s wildest action has been in the bond market, where traders are rushing to guess what all the chaos will mean for future Fed action. On one hand, stress in the financial system could push the Fed to hold off on hiking rates again at its meeting next week, or at least ease back from the projected 50 basis point gain that was in vogue up until this week. Now the betting is that it will go by 25 points or do nothing.

The P.P.I. report was definitely considered friendly and would probably have resulted in a higher stock market if not for the overhang from the latest bank disaster from CS. It showed a decline in the overall rate down to -0.1% and a yearly gain of 4.6%, which continues the recent downtrend.

February retail sales dropped by 0.4% in another sign that the economy is softening a bit as well. This overall situation led to another large decline in rates as for instance the   two-year yield fell back to 3.89% from 4.25% late Tuesday. The 10-year ended at 3.47% which narrowed the inversion spread back to just over 40 basis points from as high as 104 just last week.

Earnings this week will see: today – ADBE, SIG higher and FIVE lower; Thursday – DG and FDX.

Economic reports will have: yesterday  – February retail sales fell by – 0.4%, March NY State Empire Manufacturing Survey plunged to -24.6, February P.P.I. surprisingly declined by -0.1% for a year over year advance of 4.6% and excluding food and energy was unchanged; today – weekly jobless claims fell by 10K down to 192K, February housing starts rose by 9.8%, Philly Fed Manufacturing Index fell by 23.2, February import prices eased by -0.1% while export prices were up by 0.2%; Friday – mid-month U. of Michigan Consumer Sentiment Survey.

Donald M. Selkin

Chief Market Strategist


Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.