Highlights
Major stock averages seesawed to to end narrowly mixed Monday with small- and medium-sized bank stocks getting whacked again despite US authorities rolling out new measures intended to ensure the solvency of the banking sector, which has been shaken by the collapse of Silicon Valley Bank and Signature Bank.
The Dow Jones industrial average slipped 0.3 percent, the S&P 500 lost 0.2 percent, and the NASDAQ rose 0.5 percent. US Treasury yields continued to drop in the flight from risk with the 2-year note yield down an incredible 57 basis points Monday after falling nearly 50 basis points on Thursday and Friday. The dollar rose while oil prices fell.
A flight into megacaps and other relatively defensive sectors prevented the major averages from breaking lower. Risk aversion and broad weakness persisted as an array of measures from the Federal Reserve, FDIC, and the Treasury apparently spooked investors into fearing a broader financial meltdown. Federal authorities agreed to make all depositors whole at the failed Silicon Valley Bank and Signature Bank, and introduced a new Fed lending facility magically allowing banks to pledge their US government debt as collateral at par rather than at diminished market value.
Falling market interest rates reflect the view that the Fed will pause its rate-hike campaign at its March meeting, in contrast with prior expectations for a 25 or even 50 basis point move before the banking crisis flared late last week. Market expectations increasingly call for the federal funds rate to peak at current levels with 75 basis points in rate cuts by December. Many economists, on the other hand, still expect the Fed to push rates up at least another 50 basis points, even if there is a pause at the March meeting.
Apple and Microsoft saw good gains as investors favored companies perceived as having less exposure to the financial sector. Among defensives, health care, real estate, and utilities advanced strongly. Lagging to the downside, in addition to the disastrous showing in financials, were materials, industrials, and energy, amid rising worries about a significant economic downturn.
The Dow Jones industrial average slipped 0.3 percent, the S&P 500 lost 0.2 percent, and the NASDAQ rose 0.5 percent. US Treasury yields continued to drop in the flight from risk with the 2-year note yield down an incredible 57 basis points Monday after falling nearly 50 basis points on Thursday and Friday. The dollar rose while oil prices fell.
A flight into megacaps and other relatively defensive sectors prevented the major averages from breaking lower. Risk aversion and broad weakness persisted as an array of measures from the Federal Reserve, FDIC, and the Treasury apparently spooked investors into fearing a broader financial meltdown. Federal authorities agreed to make all depositors whole at the failed Silicon Valley Bank and Signature Bank, and introduced a new Fed lending facility magically allowing banks to pledge their US government debt as collateral at par rather than at diminished market value.
Falling market interest rates reflect the view that the Fed will pause its rate-hike campaign at its March meeting, in contrast with prior expectations for a 25 or even 50 basis point move before the banking crisis flared late last week. Market expectations increasingly call for the federal funds rate to peak at current levels with 75 basis points in rate cuts by December. Many economists, on the other hand, still expect the Fed to push rates up at least another 50 basis points, even if there is a pause at the March meeting.
Apple and Microsoft saw good gains as investors favored companies perceived as having less exposure to the financial sector. Among defensives, health care, real estate, and utilities advanced strongly. Lagging to the downside, in addition to the disastrous showing in financials, were materials, industrials, and energy, amid rising worries about a significant economic downturn.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
