Markets tumble as banking concerns and the Fed decision looms

Dow sank 367, decliners over advancers 4-1 & NAZ dropped 132.  The MLP index was off 3+ to the 419s & the REIT index dropped 5+ to the 364s.  Junk bond funds were out of favor & Treasuries saw considerable buying, reducing yields.  Oil plummeted almost 4 to the high 71s & gold jumped 31 to 2023 (more on both below).

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US job openings tumbled in Mar to the lowest level in 2 years, the latest evidence that the Federal Reserve's aggressive interest-rate hike campaign is finally starting to cool the once red-hot labor market.  The Labor Dept said that there were 9.6M job openings in Mar, a decline from the 9.9M openings reported in the previous month.  The forecast expected openings to fall to 9.7M.  At the same time, the number of layoffs surged to more than 1.8M, an increase of 248K from the previous month.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.  The central bank has responded to the inflation crisis & the extremely tight labor market by raising interest rates at the fastest pace in decades.  Officials have raised interest rates 9 times over the past year & are widely expected to approve a 10th increase at the conclusion of their 2-day meeting tomorrow.  The number of Americans quitting their jobs, meanwhile, also dropped to 3.9M (roughly 2.5% of the workforce).  It marked the lowest level since May 2021, an early sign that a trend dubbed the "Great Resignation" is beginning to dissipate.  Switching jobs has been a windfall for many workers over the past year:  Roughly 49% of job-switchers saw their real hourly wage increase faster than inflation last year, compared with just 42% of workers who stayed in the same job, according to recent Atlanta Fed data.

Job openings dropped more than expected to lowest level in 2 years

Bank deposits dropped by $76.2B for in mid-Apr, according to seasonally adjusted data released by the Federal Reserve.  Although large & foreign financial institutions saw a plunge in deposits, small domestic banks also experienced a shrinkage in deposits.  Deposits at small US banks fell by 4.6B.  Meanwhile, deposits at foreign institutions fell by $26.9B.  These declines continue a downward trend for bank deposits.  In fact, US bank deposits fell year-over-year in 2022 for the first time since 1948.  These numbers also followed recent bank collapses that raised uncertainty across the banking sector & forced the federal gov to step in.  Following the closures & federal takeover of Silicon Valley Bank (SVB) & Signature Bank, Americans pulled nearly $100B out of banks.  Although high interest rates have raised challenges for several banks & tightened credit access for consumers, some analysts said the collapse of banks such as SVB had much to do with internal operations.  "SVB’s customer base was extremely poorly diversified, resting largely on health and tech startups in the Silicon Valley area, an industry that collectively lost $7.4 trillion in one year," the American Action Forum, a think tank, said in an analysis.  "SVB customers began to pull their deposits from SVB in order to meet their liquidity needs, and SVB needed a fast fix to cover this shortfall. Selling its long-term Treasury bonds before they matured, at such a terrible market price, was the warning sign to SVB’s venture capitalists that balance sheet liquidity was dire, sparking a bank run as depositors sought to withdraw their assets."  Despite the recent closures of major tech-focused banks, Americans are overall confident in the banking industry, according to a recent analysis by Morning Consult.  In Feb, 66% of US adults said banks do what is right.  Following the federal takeover of SVB & Signature Bank in Mar, that trust increased to 70%.  Additionally, only 10% of Americans said they moved their money after the fall of SVB, Signature Bank & Silvergate Capital.  "The share of Americans with trust in banks slightly increased in wake of the collapse of three regional banks in early March," Morning Consult said.  "A similar trend was true when it came to consumers’ trust in the nation’s 10 largest banks: Despite the tumultuous events, no bank saw a significant negative swing in trust. This proves that consumers were able to separate the actions of a few banks from the stability of the banking system overall."  Still, many Americans said they believe the fallout from recent bank closures can still affect financial institutions.  More than 65% of adults said they think more banks will be put into receivership by the Federal Deposit Insurance Corporation (FDIC).

Bank deposits fell by more than $76 billion

New orders for US-made goods rebounded in Mar, boosted by a jump in civilian aircraft bookings, but the overall manufacturing industry continued to struggle under the weight of higher interest rates.  Factory orders increased 0.9% after decreasing 1.1% in Feb, the Commerce Dept reported.  The forecast called for orders rebounding 1.1%.  Orders increased 2.4% on a year-on-year basis in Mar.  The sector, which accounts for 11.3% of the economy, is being dragged down by the Federal Reserve's fastest interest rate hiking campaign since the 1980s.  Banks have also tightened lending following the recent financial market turmoil, while spending is shifting away from goods, typically bought on credit, to services.  Businesses are cutting back on restocking in anticipation of weaker demand later this year.  The Institute for Supply Management reported that its manufacturing PMI contracted for a 6th straight month in Apr.  Orders for transportation equipment increased 9.0% after dropping 3.2% in Feb.  Civilian aircraft orders soared 78.3%.  Motor vehicle orders fell 0.6%.  Excluding transportation, orders fell 0.7% for a 2nd straight month.  Orders for machinery declined 0.3%, but bookings for computers & electronic products increased 2.1%.  Orders for electrical equipment, appliances & components rose 0.8%.  Shipments of manufactured goods fell 0.1%.  The inventory of manufactured goods at factories dropped 0.8%.  Unfilled orders at factories rose 0.4%.  The Commerce Dept also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, declined 0.6% in Mar instead of 0.4% as reported last month.  Shipments of these core capital goods, which are used to calculate business equipment spending in the GDP report, dropped 0.5% instead of 0.4% as previously reported.  Business spending on equipment has contracted for 2 straight qtrs.

US factory orders rebound on aircraft in March

Gold futures rallied past $2000 an ounce to finish at their highest since mid-Apr.  Concerns surrounding the banking sector have provided support for haven gold, ahead of the Federal Reserve's decision on interest rates tomorrow.  Gold could rise on indications of a Fed pause in the hiking cycle.  Gold for Jun settled at $2023 an ounce, up $31 (1.6%) for the session.  The settlement was the highest for a most-active contract since Apr 13.

Gold Futures Climb Past $2,000; Silver Prices Rally

Oil futures fell for a 2nd straight session, with US prices down by nearly 5% to settle at their lowest since the end of Sep.  Stagflationary economic data, rising COVID cases in China & hawkish Federal Reserve chatter have all been added headwinds on the oil market.  If news flow remains as negative as it has been today, then a test of the late Sep lows will become increasingly likely.  US benchmark West Texas Intermediate crude for Dec fell $3.95 (4.6%) to settle at $81.64 a barrel, the lowest finish for a most-active contract since Sep 30.

Oil futures drop by nearly 5% to end at lowest since March

Investors are nervous, so they are buying gold & Treasuries.  Dow had a substantial decline in the AM, followed by a modest rebound in the the PM although still finishing at depressed levels.  In addition to the FOMC meeting & bank concerns, worries about raising the debt ceiling are nagging thoughts for all investors.  Dow can not stray far from its sideways trend near 34K (see below).

Dow Jones Industrials