Dow wemt up 66, advancers over decliners 2-1 & NAZ pulled back 76. The MLP index added 2+ to the 217s & the REIT index was even in the 353s. Junk bond funds were little changed & Treasuries saw a little selling which raised yields. Oil crawled up to the 73s after yesterday's big rise & gold recovered 16 to 1970.
AMJ (Alerian MLP Index tracking fund)
The run on Silicon Valley Bank (SVB) was not your average bank run; it was so fast, it shocked even the most seasoned regulators as depositors siphoned $4B from the bank in just hours, leaving the firm with a negative cash balance of $958M on Mar 9. "This is a very large group of connected depositors, concentrated group of connected depositors, in a very, very fast run, faster than historical record would suggest" said Federal Reserve Chairn Jerome Powell in his press conference after policymakers raised interest rates by 25 basis points last week. "The speed of the run, it's very different from what we've seen in the past, and it does kind of suggest that there's a need for possible regulatory and supervisory changes just because supervision and regulation need to keep up with what's happening in the world" Powell added. Fed Vice Chair Michael Barr, the central bank's point for bank supervision, will tell lawmakers at a hearing on the SVB & Signature Bank collapses that the banks' top brass were asleep at the wheel, noting, "SVB's failure is a textbook case of mismanagement," according to prepared testimony. He also noted that "the bank failed to manage the risks of its liabilities. These liabilities were largely composed of deposits from venture capital firms and the tech sector, which were highly concentrated and could be volatile." Complicating the speedy cash grab & poor management was a social media fury before California state regulators & the Federal Deposit & Insurance Corporation (FDIC) took possession of SVB. "It is clear that numerous issues took place with SVB," Robert Wolf, former CEO of UBS Americas, now CEO of 32 Advisors said, noting that "social media and digital finance moved faster than we have ever seen in banking, causing a run in 24 hours" plus "the concentrated client base at SVB made it less diversified than most banks of similar size," he added, in line with Barr's observation. "As of March 10, 2023, Silicon Valley Bridge Bank, National Association, had approximately $167 billion in total assets and about $119 billion in total deposits. Today's transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association's assets at a discount of $16.5 billion," the FDIC disclosed in the announcement.
Fed chair reveals exactly what led to Silicon Valley Bank's demise
Home prices continued to decline in Jan as higher mortgage rates dampened consumer demand for new houses. Prices
slid 0.6% nationally in the period from Dec to Jan, the 7th consecutive monthly decline, the S&P CoreLogic Case-Shiller
index showed. On an annual basis, prices are up just 3.8%,
according to the index. "Home prices fell again
in January and are now barely higher than they were a year ago," said
Jeff Tucker, a senior economist at Zillow. "January’s home price
weakness is yet more proof of the doldrums the housing market was stuck
in during the fall and winter, when buyers and sellers were forced to
come to terms with a new, relatively higher-interest-rate environment." The 10-city composite, meanwhile, climbed 2.5% annually, down from
4.4% in Dec & the 20-city composite also increased 2.5% Jan,
following a gain of 4.6% the previous month. Prices declined in
all 20 cities over the course of the month, except for Miami, which saw a
0.1% increase from Dec to Jan. Cities that saw the biggest
year-over-year decline include San Francisco (-7.6%), Seattle (-5.1%),
Portland, Oregon (-0.5%) & San Diego (-1.4%). "Despite this,
the Federal Reserve remains focused on its inflation-reduction targets,
which suggest that rates may remain elevated in the near-term," said
Craig Lazzara, managing director at S&P DJI. "Mortgage financing and
the prospect of economic weakness are therefore likely to remain a
headwind for housing prices for at least the next several months." The Case-Shiller index reports with a 2-month delay, meaning it may not capture the latest slowdown in the market. For months, higher mortgage rates have dampened consumer demand & brought down home prices. But
in Feb, for the first time in a record 131 straight months, about
11 years, home prices posted an annual decline, falling 0.2% from the
same time one year ago, according to a separate release from the National Association of Realtors.
US home prices fell in January for seventh straight month
American manufacturers want the US to expand ties with European countries thru new trade agreements, according to a survey by the National Association of Manufacturers (NAM). The NAM Manufacturers' Outlook Survey for Q1-2023, which found that nearly 2/3 of manufacturers engaged in intl trade said was a somewhat or very important market for their company. Over 77% of respondents said they would support the US pursuing market-opening trade agreements with European countries, while about 3.5% said they wouldn't support such initiatives. "As our latest Outlook Survey has shown, manufacturers in the United States overwhelmingly want more trade agreements with friends and allies that we trust," CEO Jay Timmons said. "They know that if we cannot strengthen each other, we risk losing our way of life, much less jobs. Russia’s war on democracy in Ukraine, China’s rise and supply chain challenges here at home make it an urgent imperative to revive a robust trade agenda with Europe, the U.K. and vital allies." The survey also asked manufacturers about the extent to which the global economy is important to their company's growth. The vast majority – over 96% – said it was, including 46% saying it was very important, 31% somewhat important & 19% slightly important. A 41% plurality of the NAM survey respondents said their manufacturing company regularly exports & imports, while nearly 31% said their company regularly exports & almost 11% said their company regularly imports. Just 14% of respondents said their company neither exports nor imports. Furthermore, the survey asked manufacturers whether they're planning to boost investments & sourcing in the US after re-evaluating their supply chain. Over 62% responded that they're planning to increase the role of the US in their supply chains, while 22% said they aren't & 15% were uncertain about the matter. The NAM survey found that companies are still facing challenges attracting & retaining a quality workforce, with nearly 75% citing it as the primary challenge facing their businesses. The next biggest impediment faced by manufacturers was increased raw material prices, according to 60%, & supply chain challenges by nearly 56%. An overwhelming 90% majority of respondents said an increased tax burden on manufacturing activities would make it more difficult for their companies to expand their workforce & make investments in new equipment or facility expansions. Similarly, nearly 94% said a substantial increase in regulatory burdens would make those activities more difficult. A 49% plurality of respondents said they expect the US to experience a recession this year, while 36% were uncertain & 14% said they think the US economy will avoid slipping into recession.
American manufacturers want to expand European ties, says survey
The hearing on SVB will get a lot of attention although much of the report has already been disclosed. Now the big boys have to figure out how to fix the banking mess. Meanwhile, traders are undecided about how to invest. Additionally the economy is still stumbling along.
Dow Jones Industrials
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