Highlights
The regional bank meltdown spurred another flight to safety out of equities Thursday. The Dow industrials slipped 0.9 percent, the S&P 500 fell 0.7 percent., and the Nasdaq was off 0.5 percent. US Treasury yields declined at the short end but rose at the long end. Oil prices declined, and the dollar rose.
Despite Federal Reserve Chair Jerome Powell's assurance Wednesday that regional banking woes were ending after the sale of First Republic Bank, regional banks faced more feverish selling Thursday. Investors expect the regional bank meltdown and an expected contraction in credit to complete the Fed's anti-inflation task and tip the economy into recession.
In macro news, productivity and costs data showing an unexpected 2.7. percent decline in nonfarm productivity and a bigger than expected 6.3 percent rise in unit labor costs added inflation concerns even as the economy is expected to slow.
PacWest lost 51 percent and its trading was suspended multiple times to lead the latest scary selloff in regional banks after the bank said late Wednesday it was exploring strategic options including a sale. Western Alliance lost 38 percent but recovered from the day's lows after denying it too was for sale. First Horizon was the third big loser among banks after its acquisition by Canada's TD Bank was called off. Zions Bank dropped 12 percent.
By sector, biggest losers Thursday, in addition to financials were materials, industrials, plus retailers, auto suppliers, aerospace & defense. Holding up best were defensive plays including consumer staples, utilities, and real estate investment trusts.
Despite Federal Reserve Chair Jerome Powell's assurance Wednesday that regional banking woes were ending after the sale of First Republic Bank, regional banks faced more feverish selling Thursday. Investors expect the regional bank meltdown and an expected contraction in credit to complete the Fed's anti-inflation task and tip the economy into recession.
In macro news, productivity and costs data showing an unexpected 2.7. percent decline in nonfarm productivity and a bigger than expected 6.3 percent rise in unit labor costs added inflation concerns even as the economy is expected to slow.
PacWest lost 51 percent and its trading was suspended multiple times to lead the latest scary selloff in regional banks after the bank said late Wednesday it was exploring strategic options including a sale. Western Alliance lost 38 percent but recovered from the day's lows after denying it too was for sale. First Horizon was the third big loser among banks after its acquisition by Canada's TD Bank was called off. Zions Bank dropped 12 percent.
By sector, biggest losers Thursday, in addition to financials were materials, industrials, plus retailers, auto suppliers, aerospace & defense. Holding up best were defensive plays including consumer staples, utilities, and real estate investment trusts.
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.
