Tuesday saw a rise in U.S. markets as critical inflation data met forecasts. Stocks of regional banks rose, recovering some of their losses following the Silicon Valley Bank scandal.
The Dow Jones Industrial Average (DJI) rose 1% and the S&P 500 (GSPC) gained 1.3%. Contract volume on the heavily tech-focused Nasdaq Composite (IXIC) rose by 2%.
Bond yields increased. The yield on the standard 10-year U.S. Treasury note increased slightly from 3.54% on Monday to 3.6% on Tuesday morning. The two-year yields at the front of the yield curve increased by 4.2%. Crude oil (CL=F) is currently trading at $71.50 due to falling oil prices.
The Consumer Price Index (CPI) for February indicated prices increased 6.0% over the previous year, which was in line with analyst estimates and the smallest increase since September 2021. Core CPI, which excludes food and energy, increased by 5.5%, which was also in line with predictions.
The CPI’s shelter component, which accounts for approximately a third of the overall inflation index, increased by 0.8% last month and by 8.1% annually in February. Real-time statistics from Redfin, which show that the rental market has started to drop off, contrasts with this data from the BLS.
The Commerce Department will issue the retail sales print for February on Wednesday, which will show how much was spent in stores, online, and in restaurants. On the same day, the producer-price index for February, which gauges what suppliers are charging businesses, will be released.
Investors remained fixated on the most recent news on the demise of SVB Financial Group (SIVB) and its effects on the banking industry. According to the Wall Street Journal, the Securities and Exchange Commission and the Justice Department are looking into the closing of Silicon Valley Bank.
Members of the KBW Bank index (BKX) experienced a turnaround in bank confidence as the index increased by about 3% on Tuesday. Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) are all large-cap index participants that saw their shares trade higher.
First Republic Bank (FRC), which jumped about 30% Tuesday morning following a record drop on Monday, and other regional bank stocks also rose. On Tuesday, shares of Zions Bancorporation (ZION), Western Alliance Bancorporation (WAL), PacWest Bancorporation (PACW), and Regions Financial all increased.
Who will be a candidate to acquire SVB’s remaining assets when the FDIC takes over remains to be seen. On Sunday, the FDIC planned to sell the bank’s assets, but instead, it established a bank to hold the deposits of SVB and declared that all depositors would be compensated.
According to the US Market Intelligence team at JPMorgan, the market will likely be “wrestling” with the Fed’s course as it must “weigh financial stability” vs. “inflation risks.”
Market players have so far promptly changed their expectations regarding the Fed’s upcoming action. In a sharp contrast to last week, according to data from CME Group, 80% of traders anticipate a 25-basis-point rate increase at the Fed’s March meeting while 20% anticipate rates remaining constant.
The Fed also said that it would examine the effects of Silicon Valley Bank. The central bank announced on Monday that the results would be made public by May 1. Michael Barr, the vice chair for supervision at the Fed, will be in charge of the inquiry.