By Jeffrey Smith
Investing.com — In case there isn’t enough volatility in your life, the US releases consumer inflation data at 08:30 ET (12:30 GMT). Whether it will behave well enough to calm the nerves of investors shaken by three bank failures in the past week is doubtful. Equities are slightly above the all-important figure, but the market is not yet convincingly buying back regional bank shares, and expectations for central bank action over the next two weeks have turned decidedly dovish. And crude oil prices reached their lowest level yet in 2023 as the outlook for the economy worsens. Here’s what you need to know in the financial markets on Tuesday, March 14.
1. Just when you thought it was safe to get back in the water…
The US releases data for February at 08:30 ET in a frantic market still absorbing the implications of last week’s bank collapses and authorities’ attempts over the weekend to stop their spread.
Inflation, which is still three times the Federal Reserve’s target of 2% despite falling for six months, may deter the central bank from easing financial conditions. This is especially true if the weather surprises you positively, as in January.
Analysts expect the overall rate to slow from 6.4% to 6.0% as last year’s energy spike begins to raise comparison baselines, but the consensus forecast for a hefty 0.4% gain suggests that inflationary pressures are yet to rise. has not decreased.
2. Bank stocks show a lukewarm recovery as Moody’s warns; 2nd attempted sale SVB eyed
Regional bank stocks are making only a half-hearted recovery after a massive attack on Monday, as depositors fled to the safety of too-big-to-fail institutions, unfazed by the Federal Reserve’s first attempt to calm nerves.
Moody’s put First Republic (NYSE:) and a handful of other regional banks on hold for an overnight credit downgrade, citing their vulnerability to deposit runs, something that appears to have increased with the age of smartphone banking. First Republic rose 22% in premarket trading, but that’s just a fraction of the 60%+ it lost Monday.
Elsewhere, The Wall Street Journal reported that the Fed is considering a second attempt to find a buyer for Silicon Valley Bank. The Financial Times reports that venture capital groups including General Catalyst, Andreessen Horowitz and Khosla Ventures are considering making a bid for parts of the bank, possibly with the help of Apollo Global Management (NYSE:).
Peter Thiel’s Founders Fund, which last week advised its portfolio companies to pull their money from SVB, is not a party to the talks, the FT noted.
3. Stocks open higher, waiting for CPI
US stock markets will open slightly higher, but are essentially on hold for the all-important CPI number. With the Fed in blackout mode ahead of next week’s meeting, it’s up to private sector economists to consider what this means for interest rates.
At least one bank thinks the Fed will now have to cut spending
next week, after the disappointing response to Sunday’s intervention. Nomura analysts see a 25 basis point cut AND an end to the Fed’s tapering of securities from its bond portfolio (known as quantitative tightening).
At 06:45 ET, we were up 116 points, or 0.4%, while and were up in parallel. Stocks likely to be of interest later on include Volkswagen (ETR:), which announced a significant increase in its planned investments in electric mobility over the next five years, and Uber (NYSE:) and Lyft (NASDAQ:), which won a landmark ruling in California by classifying drivers as contractors rather than employees. House builder lennar (NYSE:) reports post-close earnings.
4. UK job market cooling down; budget in mind
The and gave up some of their recent gains against the dollar after data suggested that the UK and eurozone economies could also cool down a bit. slowed from record levels in February, while data fell below expectations.
That’s probably too little, too late to affect this week’s policy meeting (which still expects a 50 basis point increase) and next week, where the market is split between a 25 and 50 basis point increase.
However, the numbers give the respective central banks reason to think twice about how they steer expectations for the rest of the year. The ECB, in particular, is likely to be aware of its catastrophic decision to keep raising interest rates well past the first signs of financial collapse in 2007.
In the UK, meanwhile, the pound is on edge ahead of Wednesday’s budget announcement by Treasury chief Jeremy Hunt. Reports have suggested that the budget will remain focused on fiscal consolidation and will be tasked with buying back lost popularity with tax cuts until next year.
5. Crude oil hits trough in 2023 as outlook worsens
Crude oil prices fell to their lowest level of the year so far on concerns about the US and the global economy due to volatility in the financial sector.
At 06:50 ET, futures were down 2.2% to $73.15 a barrel, slightly off their intraday low of $72.69, while falling 1.8% to $79.30 a barrel, marking the first time in five weeks it traded below $80.
The American Petroleum Institute is releasing data for the US as usual at 4:30 PM ET.