Fed in Focus
Investors are eagerly anticipating the Federal Reserve's imminent policy announcement about the next rate hike. As a result of subdued inflationary pressures and recent banking instability, the Fed is projected to raise rates by a more modest 25 basis points though calls for a moratorium on the hikes are getting louder following the remarkable bank runs that started with the collapse of Silicon Valley Bank.
Gold Shines Brighter
On Friday, gold prices climbed 2% to $1,960 per ounce, hitting their peak since April 2022, resulting in a 5% increase for the week - the biggest gain in four-and-a-half months. The recent worldwide banking instability, starting in the US, has raised concerns about the world economy's overall stability, causing investors to turn to gold as a secure asset. Furthermore, the anticipation of significant central banks modifying their position on inflation to prevent a severe recession has also bolstered the increase in gold prices.
In terms of the economy, consumer confidence in the US unexpectedly dropped in March. On the other hand, the European Central Bank (ECB) increased its interest rate by 50 basis points despite certain European lenders' fragility, citing the possibility of better bank profits.
Consumer Sentiment Drops
Consumer sentiment for the US declined to 63.4 in March 2023 from February's reading of 67. This marks the first decrease in four months, despite the fact that the previous month's figure was the highest in nearly a year.
The drop was well below expectations of 67, with all components showing relatively even declines, mainly due to persistently high prices. It's worth noting, however, that this decrease had already been fully realized before the failure of Silicon Valley Bank.
Low consumer sentiment is indicative of recessions.
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This Weeks Recap
- FDIC failed to sell SVB at an auction
- HSBC acquired SVB UK for $1
- Credit Suisse fell further after Saudi Bank declined to invest
- Swiss Central Bank loaned $54B to Credit Suisse
- First Republic is under pressure as large banks deposit $30B
- First Republic falls as $30B withdrawal is expected
- Yellen reported that large depositors are leaving small banks
- FDIC and Fed failed to reassure small bank investors
- WSJ reported that 186 banks face similar risks to SVB
- UBS to buy Credit Suisse for $2B
UBS + Credit Suisse
UBS is taking over Credit Suisse. The Swiss National Bank and regulators are said to be orchestrating the negotiations following the central bank's provision of an emergency credit line to Credit Suisse, which has fallen by 61% in the last 6 months.
As of Saturday, regulators offered to waive the requirement for a shareholder vote if UBS acquires Credit Suisse.
First Republic Bank Tanks
First Republic Bank (FRC) shares fell almost 33% on Friday, despite a $30 billion rescue package from large U.S. banks. The bank was in talks to raise money from other banks or private equity firms and could negotiate to be sold. Moody's downgraded FRC's debt ratings late on Friday, and PacWest Bancorp also slumped almost 19%.
The rescuer banks are likely suitors for an acquisition, but the U.S. government is less likely to endorse a purchase by the biggest banks.
Banks sought a record $152.9 billion in emergency liquidity from the U.S. central bank, according to Fed data on Thursday.
Google, Meta, and Customer Data
Law enforcement agencies are reportedly using social media platforms such as Facebook and search engines like Google to gather information and build cases against women seeking abortions or abortion-inducing medication, as abortion bans are being implemented and enforced across the nation.
The practice is coming under further scrutiny because of a Texas court case involving a man using text messages to prosecute three women who helped his wife find abortion services.
Last Week's Top Events
CASE STUDY: First Republic Reduces Dividends
First Republic Bank (FRC) shares fell almost 33% on Friday, despite a $30 billion rescue package from large U.S. banks. FRC gained support from banks such as Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank.
LevelFields users were alerted to the news at the closing bell, Thursday, that FRC would be suspending its common stock dividend.
The Dividend Reduction Scenario has a win rate of 88.89% and an AVG 1D return of -8.45%. By turning on the alert, users were able to catch the announcement and FRC's 1D return of -48%.
Key Earnings Announcements This Week
- Foot Locker (FL)
- Pinduoduo (PDD)
- Nike (NKE)
- GameStop (GME)
- Canadian Solar (CSIQ)
- AAR Corp (AIR)
- Chewy (CHWY)
- Steelcase (SCS)
- Winnebago (WGO)
- Petco (WOOF)
- Darden Restaurants (DRI)
- Yamana Gold (AUY)
- Lithium Americas (LAC)
- General Mills (GIS)
- Accenture (ACN)
See More in the Earnings Calendar
- Federal Interest Rate Decision
- Jobless Claims
- New Homes Sales
- U.S Durable Goods
The LevelFields Team