Stocks Bounce Off Lows Amid Resurfaced Banking Worries…..

U.S. equities were able to claw out of a deep hole to finish mixed, as the recent turmoil in the banking sector on this side of the pond made its way to Europe. Credit Suisse fell after its largest shareholder said it will not provide further capital assistance, further amplifying concerns toward the financial system that have come in the wake of failures of some U.S. regional financial institutions. The worries overshadowed a welcome benign read on February producer price inflation and a retail sales report that showed a key core component of spending unexpectedly rose and the prior month’s figures were revised to larger-than-expected jumps. In other economic news, homebuilder sentiment unexpectedly improved, mortgage applications rose for a second-straight week, but manufacturing output in New York contracted much more than anticipated, and business inventories surprisingly dipped. In other equity news, Lennar Corporation topped quarterly expectations. Treasury yields tumbled and the U.S. dollar rallied, while crude oil prices dropped, and gold was higher. Asia finished mostly higher after the rebound in the U.S. yesterday, while markets in Europe fell with the banking worries dragging stocks lower across the board.

The Dow Jones Industrial Average decreased 281 points (0.9%) to 31,875, and the S&P 500 Index was down 27points (0.7%) to 3,892, while the Nasdaq Composite gained 6 points (0.1%) to 11,434. In heavy volume, 6.5 billion shares of NYSE-listed stocks were traded, and 5.8 billion shares changed hands on the Nasdaq. WTI crude oil fell $3.72 to $67.61 per barrel. Elsewhere, the gold spot price increased $12.50 to $1,923.30 per ounce, and the Dollar Index rallied 1.1% to 104.72.

The banking sector remained volatile and traded to the downside, with the turmoil flaring up in Europe after Credit Suisse Group AG (CS $2) tumbled after its top shareholder, the Saudi National Bank, said it will not provide more capital assistance. This comes following the failures of SVB Financial Group (SIVB), and crypto-related Silvergate Capital Corp. (SI), and the closure of Signature Bank (SBNY) over the weekend. These stresses have fostered severe volatility in the markets and fueled concerns about contagion in the financial markets. Meanwhile, the Treasury Department, the Fed and Federal Deposit Insurance Corporation (FDIC) have enacted several measures to contain the issue.

Wholesale price inflation cooler than expected, retail sales dip but control group activity rises…..

The Producer Price Index (PPI) showed prices at the wholesale level in February dipped 0.1% month-over-month (m/m), versus the Bloomberg consensus estimate of a 0.3% gain, and following January’s downwardly revised 0.3% increase. The core rate—excludes food and energy—was flat m/m, below estimates calling for a 0.4% increase, and versus the prior month’s negatively adjusted 0.1% gain. The headline rate was 4.6% higher y/y, below expectations of a 5.4% increase, and compared to the prior month’s downwardly adjusted 5.7% rise. The core PPI was up 4.4% y/y last month, south of the estimated 5.2% rise and compared to January’s negatively revised 5.0% growth rate.

Advance retail sales for February were down 0.4% m/m, matching forecasts, and compared to January’s upwardly revised 3.2% jump. Last month’s sales ex-autos dipped 0.1% m/m, in line with forecasts and as January’s figure was adjusted favorably to a 2.4% increase. Sales ex-autos and gas were unchanged m/m, versus estimates of a 0.2% decline, and compared to January’s positively adjusted 2.8% advance. The control group, a figure used to calculate GDP, increased 0.5% m/m, versus projections of a 0.3% decrease, and following the prior month’s favorably revised 2.3% gain.

The Empire Manufacturing Index, a measure of activity in the New York region, showed the index moved further in contraction territory (a reading below zero) than expected for March. The index fell to -24.6 from the -5.8 reading that was posted in February, and compared to estimates of a move to a level of -7.9.

The National Association of Home Builders (NAHB) Housing Market Index (HMI) showed homebuilder sentiment unexpectedly improved in March. The index rose to 44 from February’s unrevised 42 level, and versus the estimate calling for a decline to 40. Despite the surprising improvement, this was the eighth-straight month that homebuilder sentiment was below 50—which suggests poor conditions. The depressed sentiment has come amid the backdrop of rising interest rates and elevated home prices, which have caused affordability to plunge, as well as elevated materials and labor costs.

The NAHB noted that, “Although high construction costs and elevated interest rates continue to hamper housing affordability, builders expressed cautious optimism in March as a lack of existing inventory is shifting demand to the new home market. While financial system stress has recently reduced long-term interest rates, which will help housing demand in the coming weeks, the cost and availability of housing inventory remains a critical constraint for prospective home buyers.”

In other housing news, MBA Mortgage Application Index rose 6.5% last week, following the prior week’s 7.4% increase. The index rose for a second-straight week as a 4.8% gain in the Refinance Index was accompanied by a 7.3% increase for the Purchase Index. The rise came as the average 30-year mortgage rate declined 8 basis points (bps) to 6.71% and is up 244 bps versus a year ago.

Business inventories dipped 0.1% m/m in January, compared to forecasts of a flat reading and December’s unrevised 0.3% advance.

Treasury rates resumed a recent tumble, as the yield on the 2-year note plunged 33 bps to 3.88%, the yield on the 10-year note dropped 16 bps to 3.47%, and the 30-year bond rate fell 9 bps to 3.67%.

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