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Economy. Stocks up for the second day in a row as the market waits for the Fed

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Tuesday on Wall Street brought a continuation of the gains from the previous day. After the fears of the banking crisis calm down, at least for a while, investors’ attention is directed to the Fed meeting. Analysts are divided – some expect a 25 basis point rate hike on Wednesday, while others expect no change.

The Dow Jones Industrial closed up 0.98%. and amounted to 32,560.60 points.

The S&P 500 was up 1.30 percent at the end of the day. and amounted to 4,002.87 points.

The Nasdaq Composite rose 1.58 percent. and closed the session at 11,860.11 points.

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The focus is on the Fed

Investors’ attention turns to the two-day Fed meeting starting on Tuesday, and the debate in the markets is whether the Fed bankers will make interest rate increases by 25 bps this week, or whether they will refrain from such a move. Currently, the money markets are pricing in 50 percent. the likelihood of an interest rate hike. In USA by 25 bps The Fed will publish its monetary policy decision on Wednesday at 19.00 GMT.

– There have been no new problems in the banking sector in the last 24 hours, so markets are hoping this is a sign that the crisis may have peaked. Tomorrow’s Fed rate decision could still cause confusion if the market decides rate hikes are too aggressive, said Russ Mold, chief investment officer at AJ Bell.

– The risk of spill-over to the banking sector is growing and could lead the Fed to pause the current cycle of interest rate hikes, although this is not our baseline scenario. The Fed is likely to signal an end to its rate hike campaign as the risk of recession increases and inflationary pressures ease, said Jeffrey Roach, chief economist at LPL Financial.

Lindsay Rosner, a multi-sector portfolio manager at PGIM Fixed Income, believes it would be best for the Federal Reserve to hold off on further rate hikes on Wednesday.

The collapse of SVB affected Credit SuisseEPA/JIM LO SCALZO Supplier: PAP/EPA.

“I don’t think our assumption that the Fed will raise rates by 25 basis points tomorrow has a high degree of certainty because there are a lot of concerns. I also don’t think that if the Fed were to order a pause that would mean a crisis is coming or that the Fed knows something we don’t know,” Rosner said.

– They can pause, they have another chance for a raise in six weeks from now; so it’s not like they’re taking a break and they’re never allowed to get a raise again. Personally, I would like them to pause, I would like them to allow some time between increases, so that we can work through what has been happening in the banking sector – she added.

Small business anxiety

Rosner said it’s not that smaller regional banks are less important to the structure of the financial system.

“Regarding the whole idea of ​​trust, we haven’t solved the problem, the system is fragile and a small business can’t operate with $250,000 in multiple regional banks, it just won’t work,” she added.

Rosner said small businesses are concerned and you see a lot of money being moved to money market and government funds rather than private equity mutual funds. She said she believes this is a sign that small businesses are very concerned about what is happening to regional banks.

“Credit conditions have been tightened and will be much stricter in the future,” she said.

While the state-backed takeover of Credit Suisse by UBSas well as steps taken by central banks to increase liquidity have eased fears of risk spreading to the wider banking sector, analysts still believe that the crisis has not been fully resolved.

UBS, Zurich, SwitzerlandEPA/ENNIO LEANZA

Read more: Turmoil in the banking market. Thousands of jobs under question>>>

“While on the plus side, so far the banks have been saved in terms of deposits, I don’t think we’re seeing the end of the turmoil. The last thing the Fed wants to do is wreak havoc on the markets, and the best thing they can do is just take a break and then come back to it in May,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

– Whereas the last global financial crisis lasted over 18 months, today’s crisis lasts only 10 days and has already led to the collapse of some US regional banks and the arranged marriage of UBS and Credit Suisse. While global regulators are moving at a pace, this appears to be a temporary, superficial improvement, said banking analyst Jonathan Mott of Barrenjoey in Sydney.

Change of key risk

A survey of fund managers conducted by Bank of America Corp. shows that a systemic credit event has replaced persistent inflation as a key risk for the markets among surveyed investors. The credit event was chosen by 31 percent. study participants as the greatest threat.

– We believe that in 6-12 months European banks will be valued much higher than they are now. It cannot be said that the banking sector is overvalued. The results of this industry in 2023 are expected to be good and we do not expect such forecasts to change significantly, pointed out Alexandre Hezez, investment director at Group Richelieu.

Second-hand home sales in the US in February amounted to 4.58 million on an annualized basis vs. the expected 4.20 million, the National Association of Realtors reported. A month earlier, the index was 4 million. In terms of m/m, the index increased by 14.5 percent. vs. -0.7 percent a month earlier. +5% expected

Shares of US regional lenders surged with First Republic Bank gaining 30% after hitting a record low on Monday.

The Wall Street Journal reported Monday that JPMorgan CEO Jamie Dimon is in talks with other major banks about new steps to stabilize First Republic, with a possible investment in the lender.

Main photo source: Shutterstock



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