At the end of last week’s issue, I told everyone to protect themselves for the boom. I did not expect one of the Global Systemically Important Banks (G-SIBs) to be caught in the chopping block. And Friday is a rare market event known for its violent price swings. So buckle up! We’ll explain what this means for the S&P 500 (SPY) in the coming days.
(Enjoy this updated version of my weekly commentary, originally published on March 16th.th2023 POWR Stocks Under $10 Newsletter).
Market commentary
I’m not going to lie, I’m still a little nervous about everything going on in the stock market (spy).
As mentioned earlier, another major bank, Credit Suisse (CS), plunged more than 20% this week after revealing in a report that it had identified “significant weaknesses.” is involved in managing financial reporting, and its biggest supporters say they can’t offer more help.
Fortunately, banks were able to boost liquidity and restore confidence by borrowing $54 billion from the Swiss central bank.
San Francisco lender First Republic Bank fell 62% on Monday and is now subject to a $30 billion bailout plan by 11 banks.
There is a lot of confusion surrounding this new “banking crisis”. It has also affected the way I look at stocks. Until this week, I had never looked into which financial institutions companies funded, but now it feels like an important part of the analysis!
Unfortunately, it was not easy to determine where a particular company has its bank.
But Roku (ROKU), for example, was found to hold about a quarter of the cash (nearly 500 million in uninsured deposits) in Silicon Valley banks…and Roku is widely traded. It’s a company. We’re not just talking about small OTC companies.
And with everything related to these banking crises in flux right now, it’s not yet clear what will be the big deal and what won’t.
Then there is the question of how the Federal Reserve will balance banking sector volatility with its fight against inflation.
Inflation is 6% in the CPI this week, still well above the 2% target level chosen by the Fed. Over the past year or more, the Fed has chosen rate hikes as a weapon to contain inflation.
But the SVB’s sudden collapse was caused by rising interest rates, and the spotlight is now on the banking industry.
Fighting inflation is no longer the Fed’s sole focus as of this weekend. Overall financial stability and lending terms should also be considered.
A pause in rate hikes would be the best way to stabilize banks, but as the February CPI and PPI reports pointed out this week, inflation won’t abate soon and rate hikes need to continue means
What should I do… what should I do…
Personally, I’m glad I didn’t put myself in his shoes.
The next Federal Reserve Board meeting is scheduled for March 21-22, which could also be a big market move.
Suspensions are good for banks, but bad for fighting inflation.
A 50 basis point rate hike is good for fighting inflation, but bad for banks.
I expect them to split the difference and end up with a 25 bps rate hike, which won’t do much for inflation and will put banks in even more trouble. So the worst of both worlds.
Today is also an important day for the market. This is “quadruple witching” where all stock futures and options contracts associated with individual stocks and indices expire on the same day.
Some of these contracts expire in the morning, others in the afternoon. This usually happens about four times a year and can coincide with the volatility in today’s market as traders try to cut losses and recoup gains early.
There could be some very big moves this quarter as about $2.8 trillion of contracts expire.
Conclusion
The market has taken some bumps this week. Small-caps, which make up the majority of stocks below $10, were particularly volatile.
Nonetheless, our trade trigger will definitely let go of two positions and bring a profit to your pocket. In a tough market environment, that’s not bad.
Plus, keep an eye on your inbox a little later this morning for some fresh new names to replace the company we’re cutting back on.
what next?
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all the best!
Margrave Meredith
StockNews Chief Growth Strategist
POWR Stocks Under $10 Newsletter Editor
SPY shares traded at $389.57 per share on Friday morning, down $6.54 (-1.65%). Year-to-date, SPY is up 1.87% on him, while the benchmark S&P 500 index is up 1% 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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