Sevens Report analyst Tom Essaye told Forbes the selloff following Silicon Valley Bank’s collapse — and a similar collapse by crypto bank Silvergate last week — was “undoubtedly an unwelcome reminder” of the 2008 financial crisis. Click here to read the full article.
What’s in Today’s Report:
Stock futures are cautiously higher and yields are bouncing globally following better than expected economic data overnight and more stable price action in U.S. bank shares while traders continue to unwind hawkish Fed policy bets ahead of today’s CPI report.
Economically, the U.K’s ILO Unemployment Rate came in at 3.7% vs. (E) 3.8% which is pressuring Gilts (down 11 bp) and lifting yields across Europe and the U.S. while the NFIB Small Business Optimism Index rose to 90.9 vs. (E) 89.9.
Looking into today’s session, focus will be on the February Consumer Price Index release before the bell with the headline expected to rise 0.4% m/m (6.0% y/y) while the all-important Core CPI figure is also expected to rise 0.4% m/m (5.5% y/y).
There are no Fed speakers today so if the inflation data comes in hot, expect a rebound in yields that would likely pressure equities as traders reassess the less-hawkish policy expectations that have been priced into rates markets since the SVB debacle began.
Additionally, bank shares (KBE) will remain in focus and if contagion fears persist and financial stocks remain under pressure, it will be hard for the broader equity market to meaningfully stabilize, much less recover some of the recent losses.
Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to discuss the latest movements in the markets after today’s jobs data. Essaye is expecting another big hike from the Fed at the upcoming meeting and discusses his take on SVP bank’s halt in trading, Silvergate’s shutdown and bitcoin. He says 2023 will be volatile and investors should remain conservative. Click here to watch the full interview.
The broad selloff was “undoubtedly an unwelcome reminder” of the 2008 financial crisis, says Sevens Report analyst Tom Essaye, noting SVB scrambled and ultimately failed to stay afloat after it was forced to sell a bond portfolio at a $1.8 billion loss because higher interest rates pushed bond prices “far below” where they were when purchased. Click here to read the full article.
Powell’s comments before the Senate Tuesday “sent the clear message that economic data in the near term will be critical for the decision-making process on the pace of future rate hikes and eventually the terminal rate,” said Tyler Richey, co-editor of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed as markets digest the three bank failures last week and the government response.
Silicon Valley Bank (SVB) and Signature Bank of New York (SBNY) both failed over the weekend, making three bank failures last week. In response to the SVB and SBNY failures, the government announced the creation of a bank lending facility, the Bank Term Funding Program, which is helping to ease concern about a broader bank run (but doesn’t entirely solve the crisis).
Today President Biden will address the nation on the situation this morning, but the key remains stability in the regional banks and in Treasury yields (they need to stop collapsing). If regional banks (KRE) and yields stabilize, markets can rally.
What’s in Today’s Report:
Futures are slightly lower following Thursday’s steep afternoon selloff and as nervous investors look ahead to the jobs report.
Economically German CPI met expectations (8.7% y/y).
Silicon Valley Bank (SIVB), which is now at the heart of the crypto/VC bank turmoil, fell farther overnight and that stock needs to stabilize for markets to recoup yesterday’s losses.
Today there are two important events to watch.
The first is the jobs report, and expectations are as follows: E: 215K Job Adds, 3.4% Unemployment Rate, 0.3% m/m/4.7% yoy Wages. Especially after yesterday’s selloff, markets need a “Just Right” number to reduce rate hike expectations. Second, markets will be looking for a business update from SIVB about their capital raise and sustainability going forward, and if the bank shored up its finances, that would likely create a solid rally in stocks.
What’s in Today’s Report:
Futures are slightly lower following a mostly quiet night of news as markets look ahead to tomorrow’s jobs report.
Chinese inflation data undershot expectations with CPI rising 1.0% vs. (E) 1.9% while PPI fell –1.4% vs. (E) -1.3% and Chinese authorities should continue to add stimulus to their economy (which will be good for global growth).
Politically, focus today will be on President Biden’s budget and the proposed tax increases, but there’s no chance the budget passes and the details of it won’t move markets.
Focus today will stay on the data and the key report will be Jobless Claims (E: 196K). Claims have remained stubbornly low and any movement above 200k will be welcomed by markets as it’ll hint there’s some deterioration in the labor market.
“Don’t confuse the market’s ability to withstand last year’s headwind with an invincibility towards what could be this year’s headwind” of slumping economic growth, Sevens Report analyst Tom Essaye wrote in a Monday note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are stable as yesterday’s Powell-driven losses continue to be digested while the yield curve is hitting new cycle lows with the 2-Yr Note holding above 5% for the first time since 2007 while the 10-Yr hovers just below 4%.
Economic focus was on German data o/n as Industrial Production topped estimates while the previous Retail Sales print was revised notably higher, bolstering Bund yields.
Looking into today’s session, focus will be on labor market data early, especially considering Powell’s “data dependent” policy comments from yesterday’s testimony.
The ADP Employment Report (E: 175K) will hit the wires before the bell and then JOLTS (E: 10.6 million) will be released after the open. Investors want to see some deterioration in the jobs market but not an all-out collapse while any indication of declining wages would be well received. International Trade in Goods and Services (E: -$69.0B) will also be released this morning but is less likely to move markets.
From there, Powell’s two-day testimony continues before the House Banking Committee today at 10:00 a.m. ET and investors will continue to listen intently for further clues about policy plans and terminal rate expectations.
Finally, there is a 10-Year Treasury Note auction at 1:00 p.m. ET that could move yields and ultimately impact the bond market, specifically if the auction tails and rates move meaningfully higher.