Dow rose 316, advancers over decliners 3-1 & NAZ added 184. The MLP index remained in demand, up 4+ to the 217s, & the REIT index dropped 2 to 361. Junk bond funds settled higher & Treasuries had very heavy selling, bringing sharply higher yields. Oil was up 1+ to the 69s & gold retreated a big 43 to 1939 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The Federal Reserve is expected to raise interest rates by a ¼ point, but it also faces the tough task of reassuring markets it can stem a worse banking crisis. Economists mostly expect the Fed will increase its fed funds target rate of 4.75-5.00% tomorrow, though some expect the central bank could pause its hiking due to concerns about the banking system. Futures markets were pricing in a roughly 80% chance for a rate rise, as of today. The central bank is contemplating using its interest rate tools at the same time it is trying to soothe markets & stop further bank runs. The fear is that rising rates could put further pressure on banking institutions & crimp lending further, hurting small businesses & other borrowers. Federal regulators stepped in to guarantee deposits at the failed Silicon Valley Bank & Signature Bank, & they provided more favorable loans to banks for a period of up to 1 year. The Fed joined with other global central banks Sun to enhance liquidity through the standing $ swap system, after UBS agreed to buy the embattled Credit Suisse. Investors will be looking for assurances from Fed Chair Jerome Powell that the central bank can contain the banking problems. The event kicks off just 2 weeks after Powell warned a congressional committee that the Fed may have to hike rates even more than expected because of its battle with inflation. Those comments sent interest rates soaring. A few days later, the sudden collapse of Silicon Valley Bank stunned markets, sending bond yields dramatically lower. Bond yields move opposite price. Expectations for Fed rate hikes also moved dramatically: What was expected to be a ½-point hike 2 weeks ago is now up for debate at a ¼ point or even zero. Markets were calmer this week with stocks rising & Treasury yields edging higher. The action comes after UBS' weekend agreement to buy Credit Suisse for $3.25B soothed some nerves about the global banking system. But worries remain about US regional bank First Republic,which received deposits of $30B from a consortium of banks last week. It has been reported that JPMorgan is working to help the bank find alternatives, such as a capital raise or sale.
Fed is likely to hike rates by a quarter point but it must also reassure it can contain a banking crisis
A number of Credit Suisse bondholders said that they were considering legal action after $17B of the bank’s additional tier-one (AT1) bonds were wiped out as part of its emergency sale to UBS Swiss regulator FINMA announced Sun that the AT1s, widely regarded as relatively risky investments, will be written down to zero, while stock investors will receive payouts as part of the takeover, angering bondholders. Quinn Emanuel Urquhart & Sullivan said yesterday that it had put together a “multi-jurisdictional team of lawyers from Switzerland, the U.S. and the U.K.” following the rescue deal. “That team are already in discussions with a number of holders of Credit Suisse’s AT1 capital instruments, representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse, about the possible legal actions that may be available to them in light of the announcement of the merger between UBS and Credit Suisse,” the firm said. Ordinarily in the event of a bank failure, AT1s — also known as contingent convertibles or “CoCos” — would be prioritized above equity holders. The bonds were created after the Global Financial Crisis as a means of diverting crisis risk away from taxpayers. The Credit Suisse write-down represents the largest loss ever inflicted on AT1 investors since their inception. The decision by Swiss authorities to upend the long-established norms & hit AT1 bondholders over equity investors has been criticized for damaging confidence in the asset class, potentially creating a spillover effect in global markets
Credit Suisse bondholders prepare lawsuit after contentious $17B writedown
Despite ongoing market volatility & a sluggish start to 2023, the price of gold & silver continues to outperform the stock market while maintaining an upward trend towards historic highs. The price of gold futures peaked at $2014 yesterday before quickly retreating below the $2000 marker, while silver continues to rally strong in recent weeks, rising roughly 4% the last month & another 3.1% the last week. Jonathan Rose, CEO of Genesis Gold Group, said, "Both gold and silver added 15% to 20% over the last six months, while the overall market was in the range of 2% to 4% growth." "Things are just starting to heat up," he added. "In fact, the long-term projections in the precious metals market could get even higher." "And regardless of the Fed's position, few Americans have faith that the U.S. dollar will strengthen, providing a strong case for allocating a portion of funds to a tangible and secure asset," Rose added. YTD, the $ has slipped roughly 0.27% & is now just $0.93 of the euro and€ & $0.82 of the £. The Federal Reserve will announce another interest rate decision tomomrrow, after the latest bump placed rates at 4.50-4.75%, notching the highest mark since 2007 & the 8th consecutive increase. The interest rate hike in Feb followed a ½-point jump in Dec & 4 75-basis-point hikes earlier in 2022. Rose said in light of several major banking institutions failing over the last few weeks, "you now have the government and Fed claiming they can orchestrate a soft landing." "No one knows exactly what will happen in the future," he rebutted. "Historically speaking, you would be hard-pressed to find a more consistent option than precious metals to place your hard-earned money when the economy is crashing." Gold remains the enduring metal for investors because of its connection to currency alongside supply & demand factors, despite being primarily used in industry for its properties as a conductor in electronics manufacturing in both the aerospace & defense.
Gold rush still on for 2023, precious metals outperforming market last 6 months
Gold futures fell by more than 2%, marking their largest single session loss in about 6 weeks. Prices for the metal touched an intraday high above $2000 yesterday as concerns over the banking system boosted the appetite for safe-haven assets. Fears of a full-blown crisis later eased following the historic takeover of Credit Suisse & this blunted appetite for gold. However the precious metal is set to glow amid the fragile sentiment with expectations around a less aggressive Federal Reserve limiting downside losses. The Federal Open Market Committee will announce its monetary policy decision on tomorrow. Gold for Apr fell $41 (2.1%) to settle at $1941 an ounce.
Gold Futures Post Biggest 1-Day Loss Since Early February
Oil prices climbed to post a 2nd straight session gain. Prices have bounced back sharply off their recent lows as risk sentiment improved following the coordinated actions of major central banks at the weekend & UBS's takeover of Credit Suisse. Still, oil prices had been trending lower for months & their breakdown last week from a multi-week consolidation pattern suggests there may be more downside potential in oil prices. Currently, news that Russia has decided to keep its oil production at a reduced level thru Jun & calmer market conditions has helped to keep prices in the positive. On the contract’s expiration day, Apr West Texas Intermediate crude rose $1.69 (2.5%) to settle at $69.33 a barrel. May settled at $69.67, up $1.85 (2.7%).
Oil futures finish higher for a second session
Investors are embracing risk investments like stocks after Yellen pledges support for US banks. Now they wait for Powell to speak tomorrow.Dow Jones Industrials
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