Markets waver ahead of March infation data and earnings

Dow gained 98, advancers over decliners 4-1 & NAZ was down 52.  The MLP index went up 2+ to the 225s & the REIT index added 1+ to the 373s.  Junk bond funds were higher & Treasuries continued to see selling, bringing higher yields.  Oil jumped 1+ to the 81s & gold advanced 15 to 2019 (more on both below).

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Treasury Secretary Janet Yellen struck an optimistic tone about the state of the global economy, saying that it is faring better than many expected in the fall despite persistent inflation & recent turmoil within the banking sector.  "During the G20 [meeting] in February, I said that the global economy was in a better place than many predicted last fall. That basic picture remains largely unchanged," Yellen said at the start of the World Bank & Intl Monetary Fund's spring meetings.  The meetings come just weeks after the collapse of 2 regional lenders in the US, Silicon Valley Bank & Signature Bank, rattled global markets amid fears of a more expansive financial crisis.  Swiss lender Credit Suisse also teetered on the edge of failure before UBS snapped up its smaller rival in a nearly $3.25B deal.  Within days, US authorities took extraordinary steps to contain the fallout from the banks' failures & shore up wavering confidence in the financial system, including protecting all deposits at the 2 institutions – even those accounts that exceeded the Federal Deposit Insurance Corporation's $250K insurance limit.  "The U.S. banking system remains sound, with strong capital and liquidity positions," Yellen said.  "The global financial system also remains resilient due to the significant reforms that nations took after the financial crisis."  Her upbeat comments stand in contrast to the rather gloomy economic forecast released by the IMF earlier today.  In its latest World Economic Outlook, the institution projected that global GDP will grow by just 2.8% this year – which represents a 0.1 percentage point decline from its previous forecast in Jan – before rising to 3% in 2024.  "The major forces that affected the world in 2022… seem likely to continue into 2023," the report said.  "But these forces are now overlaid by and interacting with new financial stability concerns. A hard landing – particularly for advanced economies – has become a much larger risk. Policymakers may face difficult trade-offs to bring sticky inflation down and maintain growth while also preserving financial stability."  The US economy is likely to grow just 1.6% this year & 1.1% next year, according to the IMF, a slight improvement from the January projections.

Yellen explains why the global economy is on the upswing

Interest rate rises have increased banks’ vulnerabilities, & their response presents a significant risk to global growth, the IMF's chief economist warned.  “We are concerned about what we have seen in the banking sector, particularly in the U.S. but maybe also in other countries, might do to growth in 2023,” Pierre-Olivier Gourinchas said.  Central bank hikes have increased funding costs for banks, while lenders have also seen some losses in assets like long-term bonds.  “Banks are in a more precarious situation. They have healthy cushions, but it’s certainly going to lead them to be a little bit more prudent and maybe cut down lending somewhat,” Gourinchas said.  In one scenario, the IMF sees funding conditions for banks tightening further & squeezing lending, bringing its forecast of 2.8% global growth in 2023 down to 2.5%.  Gourinchas said its models had also forecast a more adverse scenario where financial stability is not contained.  “That would lead to massive capital flows from the rest of the world trying to go back to safety, going to U.S. Treasurys, dollar appreciation, increasing risk premia, loss of confidence,” he said.  In this scenario, the IMF sees the world economy growing at ecastabout 1% for this year.  But the likelihood of this is comparatively low, Gourinchas noted, at about 15%.  The IMF on released its latest global growth report, which contained its weakest medium-term growth expectations for more than 30 years.  Gourinchas said that the debate around central bank rate hikes had shifted from growth versus inflation to financial stability versus inflation.  He said central banks & financial authorities have shown they have the tools to address pockets of instability, for example US regulators guaranteeing deposits for Silicon Valley Bank customers & Bank of England gilt purchases.  “Monetary policy should stay focused on bringing inflation down, that’s our recommendation at this point,” Gourinchas concluded.

Banks in ‘more precarious situation’ creating risks for global growth, IMF chief economist warns

Boeing (BA), a Dow stock, delivered 64 planes last month, the most since Dec, while some customers continue to await new aircraft to capitalize on a boom in travel.  The handovers included 7 Boeing 787 Dreamliners, which the company resumed deliveries of in mid-Mar after addressing a data analysis flaw that was reported in late Feb.  BA also handed over 52 of its bestselling 737 Max jets, just as it gears up to increase production of the planes.  Last month, Stan Deal, CEO of BA's commercial aircraft unit, said that the company plans to increase production of the 737 Max planes “very soon” from the current rate of 31 a month, but he didn’t provide further detail.  The company has targeted deliveries of more than 400 Max planes this year.  BA also reported net orders for 38 planes in Mar as demand picks up for new jets.  Recent high-profile sales have come from United Airlines (UAL), which ordered at least 100 Dreamliners late last year, Air India & 2 Saudi airlines.  The stock rose 1.54.
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Boeing aircraft deliveries jump as airlines await new jets for travel rebound

Gold futures climbed to mark a 6th consecutive settlement above $2000 an ounce.  Recent price action re-confirms that the $2000 psychological level remains a pivotal point for bulls & bears.  Economic reports & risk events will influence whether gold concludes the week above or below this level.  The Mar reading for the US consumer price index is due out tomorrow.  Gold for Jun rose $15 (0.8%) to settle at $2019 an ounce.

Gold futures settle above $2,000 for a sixth straight session

Oil futures climbed, with US prices settling at their highest since Jan a day after posting the lowest finish in more than a week.  The oil market is now stuck between 2 competing narratives.  On the bullish side, there are hopes of OPEC+ cuts & a Chinese economic rebound in the H2 of the year pulling oil prices higher.  On the bearish side, there is a growing expectation that the US will move into recession later this year, pulling down growth hopes for developing economies as well.  May West Texas Intermediate crude rose $1.79 (2.2%) to settle at $81.53 a barrel.

U.S. oil futures settle at highest since January

Dow had a good day again although there was selling into the close.  At the same time, tech stocks on NAZ could not find many friends.  Inflation data will get a lot of attention tomorrow which will drive the stock market.

Dow Jones Industrials