A Turbulent Week for Stocks
The stock market was unable to find sustained direction as investors weighed comments from Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. Stocks initially rose as banking fears eased following a deal to acquire a troubled Swiss bank. Optimism was further fueled by Yellen, who said the government could intervene to protect depositors if more bank issues materialized.
Enthusiasm faded, however, when Yellen subsequently testified that the Treasury was not working on any blanket insurance for bank deposits and by the Fed’s warning that banking turmoil could shrink lending access — the volatile week ended with sharp intraday price swings, shrugging off revived European banking concerns.
Despite ongoing banking turmoil and a sour response to the week’s Fed meeting, the major U.S. averages all finished the week up more than 1% with the NASDAQ leading the way, registering a 1.68% gain.
International stocks performed well, but EM outpaced international developed markets by nearly a percent and beating all other stock indices on the week, returning +2.23%.
Small caps underperformed their large cap peers with the Russell 2000 Index up just 0.53% for the week.
Bonds had another solid week with yields contracting significantly in response to the Fed news. The Bloomberg US AGG Bond index returned +0.52%, and Bloomberg Global AGG index +0.75%.
Miami, San Diego State Join a Men’s Final Four That Is Missing the Top Seeds: At this time last year, a collection of college basketball’s royalty—Duke, Kansas, North Carolina and Villanova—was preparing to gather for one of the highest-pedigreed Final Fours in men’s tournament history. This season, the glamor teams are out, replaced by a trio of lesser-known underdogs from beach communities—Miami, San Diego State and Florida Atlantic—plus the northerners from Connecticut, who are by far the most familiar basketball power in the pack. It is the first time since 2011 that none of the tournament’s No. 1 or No. 2 seeds reached the Final Four. Miami and San Diego State, each a No. 5 seed, defeated second-seeded Texas and sixth-seeded Creighton respectively on Sunday. Both games were thrillers that saw early deficits overcome and late, nervy moments endured. The Hurricanes and Aztecs join a Final Four that already included No. 9 seed Florida Atlantic and No. 4 seed UConn, who won their regional finals on Saturday.2
First Citizens Acquires Much of Failed Silicon Valley Bank: First Citizens Bancshares Inc., one of the nation’s largest regional banks, is buying large pieces of Silicon Valley Bank more than two weeks after the lender’s collapse sent tremors through the banking system. The Federal Deposit Insurance Corp. said First Citizens is acquiring all of Silicon Valley Bank’s deposits, loans and branches, which will open Monday morning under the new ownership. The purchase includes $56.5 billion in deposits and about $72 billion of SVB’s loans at a discount of $16.5 billion. Some $90 billion of SVB’s securities will remain in receivership. Regulators took control of Santa Clara, Calif.-based SVB on March 10. The collapse sparked a panic that led to the weekend failure of Signature Bank and a dramatic intervention by financial regulators aimed at easing fears that depositors would flee smaller lenders. The sale represents a milestone in regulatory efforts to clean up after two of the largest bank failures in history, at a time when investors are on edge about the health of the global financial system. Shares of First Citizens surged more than 40% shortly after the opening of trading Monday. Shares of other regional banks including First Republic Bank, PacWest Bancorp and Western Alliance Bancorp were also higher.3
Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.
1. Data Obtained from Morningstar as of 3/24/2023
Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.
CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.
Producer Prices - PPI (headline and core): Producer prices (output) are a measure of the change in the price of goods as they leave their place of production (i.e. prices received by domestic producers for their outputs either on the domestic or foreign market).
PCE (headline and core): PCE deflators (or personal consumption expenditure deflators) track overall price changes for goods and services purchased by consumers. Deflators are calculated by dividing the appropriate nominal series by the corresponding real series and multiplying by 100.
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
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3/24 Market View Weekly: By the Numbers
March 30, 2023