Dow went up 82 after a weak opening, advancers over decliners 3-2 & NAZ added 145. The MLP index dropped 2+ to the 211s & the REIT index inched higher in the 368s. Junk bond funds continued to be out of favor & Treasuries saw more buying, reducing yields. Oil crawled up to 68 & gold was off 4 to 1926 following its recent rally.
AMJ (Alerian MLP Index tracking fund)
Treasury Secretary Janet Yellen
will tell Congress today that the US banking system "remains
sound" after days of turmoil within the industry roiled global markets & ignited panic over a broader financial meltdown. Yellen's testimony before the Senate Finance Committee comes days after US regulators took extraordinary steps to contain the fallout from the collapse of Silicon Valley Bank & shore up wavering confidence in the financial system. "I
can reassure the members of the committee that our banking system
remains sound, and that Americans can feel confident that their deposits
will be there when they need them," Yellen will say in prepared
remarks. "This week’s actions demonstrate our resolute commitment to
ensure that depositors’ savings remain safe." On Sun, the Treasury Dept, Federal Reserve & the
FDIC announced that the federal gov would protect all SVB
deposits, even those holding funds that exceeded the FDIC's $250K insurance limit. The
aggressive actions by banking regulators to protect depositors from
losing money prompted some criticism from Rep senators, who have
slammed it as a bailout. The Biden administration has pushed back hard
on that idea. "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer," the statement from regulators said. Yellen
will likely face scrutiny on today over who will ultimately foot the
bill for the gov intervention in SVB's collapse & what this
could mean for the future of the banking industry. "Customers were able to access all of the money in their deposit
accounts so they could make payroll and pay the bills," Yellen will say. "Shareholders and debtholders are not being protected by the
government. Importantly, no taxpayer money is being used or put at risk
with this action. Deposit protection is provided by the Deposit
Insurance Fund, which is funded by fees on banks." Although the
gov's actions helped to stabilize markets earlier this week,
investors were spooked again yesterday when Credit Suisse said its
biggest backer would not provide the bank with any additional funding. While
problems at the European lender appear to be unrelated to SVB, the
back-to-back issues sparked fresh fears over the vulnerability of the
banking sector in the era of high interest rates.
Yellen gives update on state of US banking system in wake of recent turmoil
The European Central Bank (ECB) announced a further rate hike of 50 basis points, signaling it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector. The ECB had signaled for several weeks that it would be raising rates again at its Mar meeting, as inflation across the 20-member region remains sharply above the targeted level. In Feb, preliminary data showed headline inflation of 8.5%, well above the central bank's target of 2%. Some market players questioned whether Pres Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector. Credit Suisse shares tumbled by as much as 30% yesterday intraday trade & the whole banking sector ended the session down 7%. “Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points,” the ECB said. This latest move brings the bank’s main rate to 3%. It was in negative territory before Jul last year. “The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions,” the central bank said in its same statement.
European Central Bank hikes rates despite market mayhem, pledges support if needed
The US economy may not be in a recession, but it feels like it in a lot of stores across the nation. Take Kroger, for instance. Inflation-pinched customers are downloading more coupons, cooking meals at home & switching to lower-priced private label brands to save money, the grocery giant's CEO, Rodney McMullen, said. “What customers are telling us, they’re already behaving like they’re in a recession,” he added. Now, major retailers are dusting off their playbook for a recession, or at least for a period of slower sales. Companies previewed their strategies for the tougher backdrop in recent weeks, as they reported holiday-quarter earnings and shared full-year outlooks. As the travel and restaurant sectors bounce back, it looks like the rolling recession is coming for the retail sector, even if the economy remains strong. Many retailers are calling for flat to declining sales this fiscal year, especially once the lift from inflation is taken out. It's a sharp turnabout from the early years of the pandemic, which was a boom time for retail spending. As the going gets tougher, retailers are looking toward a familiar audience: Loyal shoppers.
Retailers see a tough year ahead, so they’re rolling out the recession playbook
Buyers seem to approve the surprise rate hike by the ECM. It's difficult to believe that Yellen's words are behind the rise. Or maybe this is just a relief rally among all the confusion out there.Dow Jones Industrials
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