Continued high volatility expected
Interest rate hopes spur Wall Street
03/14/2023 9:52 p.m
In the US, inflationary pressures are easing. However, it is unclear how the Fed will proceed. However, the bank turmoil is raising hopes among investors that future rate hikes could now be much more moderate.
The latest US inflation data has pushed Wall Street higher. Investors hoped that the decline in the inflation rate would persuade the US Federal Reserve to raise interest rates slightly, thereby relieving the burden on the banking system. The fear of further bank failures after the collapse of the Silicon Valley Bank (SVB) and the Signature Bank as a result of the effects of rising interest rates, which had shaken the stock markets on Monday, subsided noticeably. The Dow Jones Index the standard values closed 1.1 percent higher at 32,155 points. The tech-heavy one Nasdaq advanced 2.1 percent to 11,428 points. The broad one S&P 500 increased 1.7 percent to 3920 points.
US goods and services inflation fell as expected to 6.0 percent in February from 6.4 percent in January. According to analysts, this level is still too high. However, the Fed is under pressure not to do more damage to the banking system after the recent bankruptcies. Commerzbank economists Christoph Balz and Bernd Weidensteiner wrote that it is not yet possible to say with certainty how the two risks will be assessed at the next Fed meeting on March 22nd. “However, a large rate hike is probably off the table, and even a small one has become uncertain.” The majority of market participants expect interest rates to rise by 25 basis points.
Bank bonds turn positive
Bank stocks embarked on a recovery course. Big money houses like Goldman Sachs, Citigroup and Wells Fargo Gained between 2.1 and 5.9 percent, largely recouping their losses from the previous day. Small regional banks like First Republic and PacWest, which had lost up to 85 percent, climbed up to 34 percent. Also the Facebook mother Meta was in the spotlight. A fresh wave of layoffs drove the stock up more than 7 percent. The company, which also owns the messenger service WhatsApp and the photo platform Instagram, wants to cut another 10,000 jobs. In addition, around 5,000 vacancies should not be filled. Just four months ago, Meta had already announced the layoff of 11,000 employees.
The papers of the transport agent were also in demand Above, which increased by almost five percent. A California court has reinstated a rule that allows app-based ride-hailing services to classify their drivers as independent contractors rather than employees. The shares of United Airlines lost more than five percent. The US airline expects a loss in the first quarter due to higher costs.
Oil price under pressure
In the crude oil market, meanwhile, investors remained cautious. Grade Crude Oil Brent and US light oil STI fell by around four percent to $77.54 and $71.47 a barrel, respectively. Aside from the Silicon Valley bank shockwaves, signs of a weaker-than-expected economic recovery in China also weighed on oil prices, said Leon Li, an analyst at CMC Markets. The analysts at Commerzbank are also expecting major fluctuations on the energy markets in the coming days.