Investors struggle to adjust earnings expectations for the year as the Fed's inflation-fight focus raises the prospects of sharper earnings slowdown in the second-half of 2023.
Investors reassessed the health of the U.S. banking system and rising recession risks as regional banks are forced to shore up capital and curtail private sector lending and cover rising losses in Treasury securities.
Investors attempted to look beyond the fast moving regional banking crisis and Treasury yields resumed their advances. Regional banking sector stress is not likely to go away soon, despite swift actions and soothing words by the U.S. bank regulators.
Financial regulators moved swiftly to sell some of the assets of the former Silicon Valley Bank and are ready to pump additional liquidity and support First Republic Bank.
Stocks rebounded on the hopes that the Federal Reserve is nearing its rate hike campaign. Tech stocks led the gainers and regional banks rebounded as investors overlooked recession worries and fast moving banking crisis.
Fed's economic reality collided with the market's view and major averages turned lower after Fed Chairman Powell ruled out lowering rates in 2023 and Treasury Secretary Yellen said that the FDIC is not looking to provide insurance to all bank deposits.
With all eyes on Fed's rate decision and accompanying commentary, the Federal Reserve's credibility is on line after fueling inflation through a decade of negative rates.
Benchmark indexes rebounded, regional banks recovered and crude oil price dropped to a new 15-month low. Regional banks urge lawmakers to extend guarantees to all uninsured deposits and prevent the outflows to larger banks.
The Swiss regulators and the central bank forced the purchase of Credit Suisse by UBS after months of assets and deposit outflows, removing one uncertainty from the global marketplace.
Market averages drifted lower on the final day of the week but the Nasdaq and the S&P 500 indexes advanced in a volatile week. Investors are asking more questions about the health of the U.S. banking system after rapid rise in rates dent assets at most banks.
The $30 billion deposit from 11 largest banks in the U.S. may shore up confidence in First Republic for a while, but regulators will struggle to arrange similar temporary fixes as losses mount in the assets held by regional and large banks.
