What you should know this week

March has long been expected to serve as a pivotal month for the Federal Reserve.

And after the first two weeks of the month made headlines for the central bank for a whole year, what investors had been expecting to be the main event finally arrives next week.

On Wednesday at 2pm ET, the Fed will announce its latest monetary policy decision, with Fed Chair Jerome Powell following the announcement with a press conference at 2:30pm ET. Alongside its policy decision, the Fed will also release updated forecasts for inflation, unemployment, economic growth and interest rates for the remainder of this year and beyond.

After Powell testified before the Senate Banking Committee on March 7 that the Fed was likely to raise rates “more than previously expected” in response to persistent inflation, investors were all but certain that the Fed was within the target range for would increase its reference interest rate by 0.50%. on March 22.

Two days later, a looming banking crisis cast a shadow over the Fed’s plans. On Sunday evening, March 12, the Fed was part of a government-led bailout of deposits across the US financial system. Investors are now roughly divided on whether the Fed will hike rates at all on Wednesday.

“We still expect the Fed to hike interest rates by 25 basis points next week, but also send a less harsh anti-inflation message than was assumed a few weeks ago to calm market fears,” wrote Bob Schwartz, Senior Economist at Oxford Economics. in a note to customers on Friday.

“While the banking issues will certainly attract attention, we believe it is not a systemic issue but rather a liquidity issue that the Fed can contain with its lending facilities,” Schwartz added. “The wild card going forward will be the reaction in financial markets as maintaining financial stability is one of the Fed’s mandates.”

FILE – Federal Reserve Chairman Jerome Powell speaks during a news conference Wednesday, December 14, 2022, at the Federal Reserve Board Building in Washington. As the main regulator of Silicon Valley Bank, the Federal Reserve has been harshly criticized by financial regulators and banking pundits. (AP Photo/Jacquelyn Martin, file)

Last week, government officials, regulators and private sector executives in the banking world attempted to stabilize the US financial system following the rapid collapse of Silicon Valley Bank and the seizure of Signature Bank.

The story goes on

The week’s main development came on Thursday afternoon, when a consortium of 11 US banking giants announced they would be transferring around $30 billion in deposits to First Republic (FRC), which investors and regulators feared would be the next entity that would fail.

Even with last week’s capital injection, First Republic shares are down over 70%; On Friday alone, the stock fell about 33%.

Amidst this spate of banking sector news, the major US equity indices ended the week mixed, with the Nasdaq Composite (^IXIC) up more than 4%, the S&P 500 (^GSPC) up 1.4% and the Dow Jones Industrial Average (^DJI) record of modest losses.

However, financial stocks were hit hard, with the KBW Bank Index (^KBX) falling more than 14% for the week, while the KBW Regional Bank Index (^KRX) lost just over 9%. Since the beginning of March, these indices are down 27% and 17% respectively.

Over the weekend, US investors kept their eyes on Europe, where recent reports from the Financial Times suggested UBS (UBS) was close to a deal to acquire Credit Suisse (CS) in a $1 billion deal that would… Credit Suisse would be valued at approximately $0.27 per share. Credit Suisse stock trading in New York closed at $2.01 on Friday.

While developments in the Federal Reserve and global banking community will remain the focus of investor attention, a few economic and earnings reports will command attention throughout the week.

The weekly mortgage applications update on Tuesday and Wednesday morning will provide data on existing home sales, providing readings on the housing sector, which has been an unexpected beneficiary of the banking crisis due to the collapse in government bond yields and the resulting fall in mortgage rates.

Investors will also be keeping a close eye on Thursday morning readings from S&P Global on services and manufacturing activity.

On the earnings side, Monday’s Foot Locker (FL), Tuesday’s Nike (NKE) and Thursday’s Darden Restaurants (DRI) results will provide updates on the state of US consumers.

economic calendar

Monday: No significant record to release.

Tuesday: Existing Home Sales, February

Wednesday: MBA Mortgage Applications; Monetary policy decision by the US Federal Reserve

Thursday: Initial jobless claims; New Home Sales, February; Kansas City Fed manufacturing index

Friday: Durable goods orders, February; S&P Flash US Composite PMI

results calendar

Monday: Foot Locker (FL), Pinduoduo (PDD)

Tuesday: Nike (NKE), GameStop (GME), Tencent Music (TME), AAR Corp. (AIR)

Wednesday: Ollie’s Bargain Outlet (OLLI), Chewy (CHWY), Petco (WOOF), Winnebago (WGO), Steelcase (SCS), Worthington Industries (WOR), KB Home (KBH)

Thursday: General Mills (GIS), Darden Restaurants (DRI), Accenture (ACN), FactSet (FDS)

Friday: No significant companies are expected.

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