Daily Market Notes: 3-17-2023

In another astounding intraday reversal, this time to the upside sort of similar to what we saw the day before, the market turned an awful opening once again into a really powerful rally based on some positive developments related to lifelines to two banks that had gotten themselves into trouble.

As a result, the Dow was able to overcome an early decline of 303 into a closing gain of 372 up to 32,246 led by gains in BA, CRM, MSFT and UNH. The S&P also followed the same pattern with an early 27 point loss getting positive in late morning and this one also skyrocketed into the close with a 68 point gain up to 3960 which now puts it above its 200-day moving average around 3940 so for those who sold when it broke below that level last week are now losing unless they were able to cover short positions near the recent low of 3850 which now becomes the newest support level. It was its best day in nearly two months.

The Nasdaq continues to be this week’s leader as those newly lower market interest rates have helped support these stocks with higher price/earnings ratios and it also overcome a smaller early decline to roar ahead into the close with a 283 point gain up to 11,717 led by MSFT which has been on a tear this week, in addition to ADBE (earnings), NVDA, NFLX, AMZN which has recently woken up and META which has been in its own upside world now for quite a while.

The Russell 2000 Index of small stocks came along for the upside ride and ended with a gain of 25 to 1771 with less pressure on some of the regional banks helping out while the VIX sank down to 22.99 after having been higher early in the session on the morning equity weakness as described above.

The bullish upside action was helped by an announcement from 11 of the biggest banks said they would deposit a combined $30 billion into First Republic Bank. This week has been a whirlwind for markets globally on worries that banks may be bending under the weight of the fastest set of hikes to interest rates in decades. The concerns have been apparent since Friday’s collapse of Silicon Valley Bank, which was the second largest bank failure in U.S. history.

Since then, investors have tried to look for banks with similar traits, such as lots of depositors with more than the $250,000 limit that is insured by the Federal Deposit Insurance Corp., or many tech startups and other people that can comment on worries about a bank’s strength. FRC has been at the center of the market’s twists and turns and it gained 10% yesterday after falling by as much as 36% early in the day. In the statement announcing their deposits, the group of 11 banks said the move “reflects their confidence in First Republic and in banks of all sizes.”

Treasury yields also strengthened suddenly following the first reports of a possible rescue by the industry, which ostensibly was a sign of increased confidence from the bond market. The yield on the 10-year Note rose to 3.57% from 3.47% late Wednesday. Earlier in in the day, it dropped as low as 3.37% and has been veering sharply since climbing above 4% earlier this month. The 2-year Note also reversed course from being lower in the morning to end at 4.15% and the action this week has narrowed the yield inversion differential between the two from as much as 105 basis points recently.

Also helping was that European stocks rose after the European Central Bank announced a 50 basis point increase in interest rates. Concerns there were also easing about another bank, CS, which helped cause markets to tumble sharply Wednesday. The Swiss bank has been battling troubles for years, but its plunge to a record low raised concerns just as more attention was shining on the wider industry. The stock gained almost 20% in Switzerland after it said it will strengthen its finances by borrowing up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

Much of the damage for banks is seen as the result of the Federal Reserve’s fastest  hikes to interest rates in decades. They have jolted the system following years of historically easy conditions in hopes of driving down painfully high inflation.

Also helping was a statement from U.S. Treasury Secretary Janet Yellen who told a Senate committee that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

Investors increasingly expect this week’s turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, and it would be counter to expectations from earlier this month for a hike of 50 as it had been potentially signaling.

Oil prices seem to have stabilized around $65 a barrel this week as investors ridiculously say that declining ones signify a recession but these lower prices are terrific for consumers because they do tend to lower inflation.

Economic reports continue to show mixed signals as for instance weekly jobless claims declined (see below) which supposedly shows a stronger labor market while the Philadelphia Fed Manufacturing Survey showed weakness once again in the mid-Atlantic region. The February housing starts report showed that perhaps the industry is finding some stability.

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

Economic reports will have: yesterday  – 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%; today – mid-month U. of Michigan Consumer Sentiment Survey fell to its lowest level of the year at 63.4, February L.E.I. came in at -.3%.

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.