Stocks Fall Amid Further Turmoil in the Banking Sector…..
U.S. equities ended the day lower, as pressure returned to the banking sector. Despite the downturn, the S&P 500 and Nasdaq posted solid weekly gains, even while contending with the volatility over the past week and a half. Treasury yields moved lower, and the U.S. dollar declined, while crude oil prices continued to tumble, and gold rallied. Other equity news was light, but FedEx posted quarterly earnings results that beat the Street and offered an upbeat outlook. Economic news was on the somber side, as the February Leading Economic Index fell for an eleventh-straight month, consumer sentiment for this month surprised to the downside, and industrial production came in flat. Asian stocks finished with gains across the board, while markets in Europe fell, as stress surrounding the turbulence in the banking sector persisted.
The Dow Jones Industrial Average decreased 385 points (1.2%) to 31,862, the S&P 500 Index fell 44 points (1.1%) to 3,917, and the Nasdaq Composite went down 87 points (0.7%) to 11,631. In heavy volume, 8.8 billion shares of NYSE-listed stocks were traded, and 7.5 billion shares changed hands on the Nasdaq. WTI crude oil lost $1.61 to $66.74 per barrel. Elsewhere, the gold spot price climbed $58.70 to $1,981.70 per ounce, and the Dollar Index went down 0.5% to 103.90. Markets ended mixed for the week, as the DJIA nudged 0.2% lower, while the S&P 500 gained 1.4%, and the Nasdaq Composite advanced 4.4%.
The banking sector remained in focus in the wake of yesterday’s report that some of the nation’s largest banks have agreed upon a plan to deposit as much as $30 billion in an attempt, supported by the U.S. government, to stabilize First Republic Bank (FRC $23). The deal comes after Bloomberg reported that the struggling bank may be exploring strategic options that include a sale and weighing options for shoring up its liquidity. The company acknowledged the support from the consortium after updating its financial position late Thursday. The turmoil has 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.
Leading Index and consumer sentiment fall, industrial production unchanged…..
The Federal Reserve’s industrial production came in flat month-over-month (m/m) in February, compared to estimates of a 0.2% gain, and versus January’s positively revised 0.3% reading. Manufacturing output rose, offset by a decline in mining and utilities production. Capacity utilization remained at the prior month’s downwardly revised rate of 78.0%, versus estimates of a slight increase to 78.4%. Capacity utilization is 1.6 percentage points below its long-run average.
The Conference Board’s Leading Economic Index (LEI) for February fell 0.3% m/m, matching the Bloomberg consensus estimate and January’s unrevised decline. The index recorded its eleventh consecutive monthly loss, as ISM new orders, consumer expectations, the yield curve, jobless claims, and credit conditions were the negative contributors, more than offsetting positive contributions from building permits and stock prices.
The preliminary University of Michigan Consumer Sentiment Index for March showed that sentiment surprisingly decreased, falling to 63.4 from February’s final reading of 67.0, and where it was expected to remain. A solid decline in the current conditions portion of the index joined a slight decrease in the expectations component of the report. The 1-year inflation forecast fell to 3.8% from 4.1% in February, and the 5-10-year inflation outlook nudged lower to 2.8% from the prior month’s 2.9% rate.
Treasury rates remained under pressure, as the yield on the 2-year note dropped 31 basis points (bps) to 3.82%, the yield on the 10-year note declined 16 bps to 3.41%, and the 30-year bond rate decreased 9 bps to 3.62%.
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