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S&P 500 Monday
“There are a lot of moving parts, so that’s why you see volatility,” said Keith Buchanan, senior portfolio manager at Globalt Investments. “There are a lot of different scenarios in which this can develop, but it all boils down to: How widespread is this risk of contagion?”
Bank stocks remained under pressure following last week’s slide, with JPMorgan Chase and Citigroup falling. Regional banks fell even more, led by a nearly 50% drop in First Republic.
But investors bought up other areas of the market outside of banks, such as some technology stocks like Apple and defensive names including Johnson & Johnson and Eli Lilly.
A joint statement from the Fed, Treasury Department and the Federal Deposit Insurance Corporation said all Silicon Valley Bank depositors would have access to their money starting Monday. The Fed also said it is creating a new Bank Term Funding Program aimed at safeguarding deposits. The facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions.
Traders are pricing in about 2-to-1 odds that the Fed raises its benchmark borrowing rate by 0.25 percentage point at the March 21-22 meeting. But the market also is anticipating that by the end of the year, the central bank will lop off 0.75 percentage point in cuts, taking the rate down to a target range of 4%-4.25%. Current pricing indicates a terminal rate of 4.75% by May.
Goldman Sachs has gone even further, saying it no longer expects the Federal Reserve to hike rates at its meeting next week.
“This news really is really a deflationary shock that the Fed has to consider,” said Gina Bolvin, president of Bolvin Wealth Management Group. “It’s definitely a game changer.”
February’s consumer price index, the next data point to be released that can provide insight into the path of inflation, is slated to come out before the market opens Tuesday.
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