Weekly Market Review March 22, 2023
The global banking system remains on high alert following the fallout from the collapse of Silicon Valley Bank (SVB), Signature Bank, and Silvergate. In the U.S., a consortium of 11 large banks provided $30 billion in deposits to embattled First Republic Bank to shore up the San Francisco-based lender and prevent broader contagion in the U.S. banking system. Overseas, Swiss-based UBS agreed to take over rival bank Credit Suisse for $3.2 billion, the first bank megamerger since 2008. The deal includes support from the Swiss National Bank which is providing a $9.7 billion backstop to cover potential losses and $108 billion in liquidity. (Source: The Wall Street Journal)
Bond investors reset their interest rate expectations on the heels of the banking sector turmoil. The week prior to the SVB collapse, 2-year U.S. Treasury notes topped 5% for the first time since 2007. Investors have been piling into Treasuries as a risk-off trade, driving down yields. The policy-sensitive 2-year Treasury note ended last week below 4% for the first time since September. (Source: The Wall Street Journal)
February inflation was reported last week with Consumer Price Index (CPI) falling for the eighth-straight month coming in at 6% year-over-year, down from 6.4% in January. Wholesale inflation, measured by the Producer Price Index (PPI), also declined on a year-over-year basis from 5.7% in January to 4.6% in February. Inflation remains in a downward trend while still being well above the Fed's 2% target level. (Source: CNBC)
This week delivers an update on the U.S. housing market, with existing home sales on Tuesday and new home sales on Thursday. All eyes will be on the Federal Reserve's FOMC interest rate decision on Wednesday amid the banking sector turbulence.
Blueprint Numbers
OSCAR WINNERS - "Everything Everywhere All at Once" won seven Oscars this year, including best picture and best actress for Michelle Yeoh's performance. Former child star Ke Huy Quan, who starred in "Indiana Jones and the Temple of Doom" and "The Goonies", won best supporting actor for his performance. The movie has grossed $110 billion globally. (Source: The Wall Street Journal)
POLITICIANS GETTING OLDER - The average age of the House of Representatives is 57.9 years old, four years older than the average in 2003. In the Senate, the average age is 64 years old, increasing by 4.5 years since the 2003 average. The oldest congressperson is Senator Dianne Feinstein at 89 years old, while the youngest is representative Maxwell Frost at 26. (Source: The Wall Street Journal)
SHELTER COSTS DRIVE INFLATION, FOR NOW - Shelter accounts for approximately one-third of CPI and was responsible for nearly 70% of February's inflation increase. However, home prices have been on the decline since June 2022 and it typically takes four quarters for inflation data to reflect changes in home prices. Long story short, declining home prices should begin to put downward pressure on inflation by mid-year. (Source: CNBC)
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