Good morning,

Last week the stock market saw a strong start and finished the week. There was mid-level volatility as investors considered the Fed’s latest policy change and ongoing concerns about the banking sector.

The Swiss National Bank mediated a $3.2B “takeunder” between UBS and Credit Suisse (CS). This announcement was made to the trading community over the weekend. The Federal Reserve assured the public that the U.S. bank system’s capital and liquidity positions are strong and that the U.S. financial sector is resilient. However, it also announced coordinated central bank actions with the Bank of Canada and the Bank of England to increase U.S. dollar liquidity.


 

According to Bloomberg reports, the Treasury Department is looking into ways to guarantee bank deposits without Congress’ approval. In prepared remarks to the American Bankers Association, Treasury Secretary Yellen stated that the government was ready to step in again “if smaller banks suffer deposit runs that present the risk of contagion.”

Investors waited anxiously for Wednesday’s FOMC decision, which caused sharp declines at the index level. However, many bank stocks that were recently in trouble reacted positively and moved higher during the first half.

By Friday’s close, the market had eliminated some of the concerns driving the downside movements this week. Despite sharp falls in Europe’s main indices following the announcement that Deutsche Bank’s (DB) default insurance cost jumped to a 4-year high, the session ended higher.
 

Table of Contents

• • FED Rate Raising – Did the Fed Blink?
  • Last Week’s Economic Reports
    • Housing Market Still Strong
    • Manufacturers Slow Down
• CALENDAR & MOVERS
  • Earnings
  • Dividend Spotlight
• BONDS
• COMMODITIES
  • OIL & ENERGY
  • PRECIOUS METALS & GOLD
• CRYPTOCURRENCY

FED Rate Raising – Did the Fed Blink?

The Federal Open Market Committee (FOMC) unanimously voted to increase the Fed funds rate target range by 25 basis points to 4.75-5.00%. In the updated Summary of Economic Projections, the Fed’s median terminal rate projection remained at 5.10%. Stock prices rose initially in response to the news but then declined as Fed Chair Powell began his press conference.

Powell, Fed Chair, accelerated the sell-off. He admitted that Fed participants don’t expect rate cuts this year. He also admitted that recent banking events were unfavorable for the possibility of an economic soft landing.

In his comments, Powell was neither hawkish nor dovish in general. He did not seem overly optimistic about the future, and this contributed to the lack of confidence among investors that led to the selling during his presentation. 

According to the fixed-income markets, the Federal Reserve may have retreated, as longer-term securities saw a smaller rate decrease than the 2-year Treasury rates. The significant rate shift for the 2-Year Treasury suggests that the market perceives the Fed as likely to back down and halt rate hikes. Read more here.

Other central banks followed their lead later in the week. The Bank of England raised interest rates by 25 basis points, indicating that more increases were possible. Central banks made similar moves in the Philippines, Norway, Hong Kong, and Switzerland.

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Have a great week!

Irving Wilkinson
Editor
AlphaBetaStock.com

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