It’s been another tumultuous week for the S&P 500 (SPY). Fed Chairman Jerome Powell testified semi-annually before the Senate Banking Committee. He posted the latest job briefs for January. A surprise run was made at a Silicon Valley bank, pushing the entire financial metrics under the microscope. And then there was the employment report for February. It has a lot to cover, so let’s get down to it!.
(Enjoy this updated version of my weekly commentary, originally published on March 10th.th2023 POWR Stocks Under $10 Newsletter).
Market commentary
So much has happened this week that I am taking it daily. Read the name of each day of the week and imagine a clock ticking from the number 24.
Monday
The Western Front is quiet.
Tuesday
Things finally kick off on the first day of Powell’s testimony before the Senate Banking Committee. What was the highlight of the day?
“The latest economic data have beaten expectations, suggesting that the final interest rate level is likely to be higher than previously expected.”
Powell said inflation remains high, the labor market is strong, and although inflation has moderated in recent months, it still has a long way to go to reach 2%.
His comments sparked a 1.5% selloff across the market, with all sectors trading below the day’s close.
Wednesday
In his second day on the podium, Powell reiterated his message that the U.S. Central Bank would likely take interest rates higher than previously expected, but Tuesday’s plunge pushed him off the script, Policy makers stressed that they are still undecided about policy decisions. The size of the interest rate hike later this month.
“I would like to emphasize that no decision has been taken on this, but if the data overall shows that a faster tightening is warranted, we would be ready to accelerate the pace of rate hikes. .”
“Data.” Powell refers to several key economic reports, including US job listings for January, employment data for February, and next week’s consumer price data.
On Wednesday we will also get the first of these reports. In January’s latest Jobs and Turnover Summary (JOLTS), job openings fell to his 10.82 million, down from his upwardly revised 11.2 million job openings the previous month. .
The Bureau of Labor Statistics reports that the construction, leisure, hospitality, and financial industries saw a significant drop in job openings.
S&P 500 (spy) and the Nasdaq rose slightly while the Dow closed slightly lower.
Thursday
It was supposed to be a relatively quiet day for markets, with Powell’s testimony ending and no major reports scheduled.
But instead, Silicon Valley Bank (SIVB), the bank of choice for many startups, has stepped back on its feet after announcing that it would liquidate its entire book of short-term securities and raise $2.25 billion in fresh capital. shot
It wasn’t a problem per se. That’s when the CEO tried to assure investors that the bank had ample liquidity, telling the group to “absolutely avoid panicking.”
There’s no better way to do it in banking!
The entire banking sector has been pushed under the microscope, with many stocks seeing double-digit losses. The S&P 500 closed below the critical 200-day moving average.
Friday
Another job release, another hotter-than-expected report. The economy he added 311,000 jobs in February (above the expected 215,000) and the unemployment rate he rose to 3.6%.
The bright spot in the report is that wage growth was 4.6%, slightly below expectations of 4.7%. But it’s still well above pre-pandemic levels…and that’s going to be a concern for the Fed.
Oh, and that bank I mentioned earlier… the FDIC closed it Friday morning. It is the largest bank to fail since the Washington Mutual bankruptcy in 2008. not good!
Wow! How many weeks? This is a chart that shows where things are.
You see, the biggest lesson I got from all of this is that the Federal Reserve could go back to raising rates by 50 bps after slowing to 25 basis points at its latest meeting.
why did it get my attention? Since 1990, the Fed has not stuttered at the end of a rate hike cycle.
What would a 50bps rate hike on March 22nd mean for the economy?
Will it automatically become a siren of “everybody panics, recession is coming”? Absolutely not.
Is it clear that it’s “OK, a soft landing is certain”? Also, definitely not.
In fact, it’s never happened in recent history, so I don’t know what that means.
We will continue to trade and use our edge to find sub-$10 stocks that are ready to explode to new heights.
Can all of this happen in a market that feels volatile? Absolutely.
Conclusion
If you thought this week was rocky, prepare for the boom!
CPI and PPI are due on Tuesday and Wednesday, 4x witching (an options event usually accompanied by a wave of volatility) on Friday, and the next Fed meeting the week after .
With everyone nervous, stocks could fall if another bank fails or an inflation report beats expectations. Like I said, we’ll tread carefully as we keep an eye out for the next big winner.
what next?
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all the best!
Margrave Meredith
StockNews Chief Growth Strategist
POWR Stocks Under $10 Newsletter Editor
SPY shares closed at $385.91 on Friday, down $5.65 (-1.44%). Year-to-date, SPY is up 0.91% on him, while the benchmark S&P 500 index gained 10% over the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a prominent financial expert and market commentator for the past 20 years. she is currently Growth of POWR and POWR Stocks Under $10 Newsletter. Learn more about Meredith’s background, with links to her latest articles.
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