A sell-off today in bank stocks is leading the stock market lower after a four-day rally. US Treasuries prices rose after softer data on US job openings increased traders' bets that the Federal Reserve officials are about to wrap up their tightening campaign. Currently, the Federal Funds interest rate futures are about evenly split as to whether the Federal Reserve will raise short-term interest rates one more time in May. Despite the narrative from the Fed Reserve Chairman about maintaining the current levels of interest rates for a while, the markets have now assigned about a 60% probability of a Fed Rate cut by Nov 2023! The typical time frame for a shift in the direction of interest rates by the Federal Reserve is about eight months.
JP Morgan CEO Jamie Dimon also released his 40+ page annual letter saying "the current crisis is not yet over" and "there will be repercussions from it for years to come." But added, "It is not like 2008 when mortgages held by financial institutions around the world went bad."
However, he also commented, "The market's odds of a recession have increased."
Last week stocks rallied on receding fears of a widening banking crisis, led by resurging investor interest in technology and communication services names.
The Dow Jones Industrial Average gained 3.22%, while the Standard & Poor’s 500 added 3.48%. The Nasdaq Composite index rose 3.37% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced by 3.34%.1,2,3
Tech Leads Rally
An absence of further bad news in the banking sector made for a good week, with high-quality technology and communication services stocks leading the market. While easing banking worries laid the groundwork for the week’s positive gains, growing conviction that Fed rate hikes were ending and positive inflation data out of Europe helped support the renewed enthusiasm for stocks.
Encouraging inflation data on the domestic front on Friday also added to the gathering optimism, igniting further gains to cap a satisfying week for investors.
Inflation Grinds Lower
In an otherwise news-light week, Friday saw the release of February’s personal income and outlays report, which provides insight into inflation and consumer expenditures, the dominant contributor to economic growth.
The Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred measure of inflation, rose 0.3% for the month, below market expectations and below the prior month’s 0.6% jump. The year-over-year increase of 5.0% improved from January’s rise of 5.3%. Energy prices declined, partially offsetting increases in food, goods, and services. Personal income rose 0.3%, while consumer spending increased 0.2%.4
This Week: Key Economic Data
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Tuesday: Factory Orders. Job Openings and Turnover Survey (JOLTS).
Wednesday: ADP (Automated Data Processing) Employment Report. Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims.
Friday: Employment Situation.
Source: Econoday, March 31, 2023
This Week: Companies Reporting Earnings
Wednesday: Conagra Brands (CAG).
Thursday: Constellation Brands (STZ).
Source: Zacks, March 31, 2023
"Our destiny is in our hands [...] So let’s build the future we all know is possible. Let’s prove to our children that they really can reach for their dreams."
– Michelle Obama
What is the IRS Alternative Media Center?
The IRS Alternative Media Center offers a variety of resources and accessibility services for visually impaired taxpayers. Using this platform, they provide tax-related content in several formats, including:
The IRS also offers enhanced accessibility services. Taxpayers can complete Form 9000, Alternative Media Preference, to choose how they would prefer to receive their tax notices (ex: in Braille, large print, audio, or electronic formats). They also have an accessibility helpline that can answer questions related to accessibility services.
*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
Controlling Different Kinds of Light to Help You Sleep Better
Controlling your environment, including your exposure to light, may help you sleep better at night.
Increase bright light exposure during the day
Reduce blue light exposure at least an hour before bed
Tip adapted from WebMD6
Two couples played paintball. Each person had blue, green, yellow, or red paint, and wore a uniform in one of those same colors. Barbara used blue paint. The person wearing green used yellow paint. Steven did not wear the red uniform. Vicki used green paint and wore blue. Ian used the same color paint as his t-shirt. Can you match each person to the color of paint and uniform they used?
Last week’s riddle: Name three consecutive days without using the words Monday, Wednesday, Friday, or Sunday. Answer: Yesterday, Today, and Tomorrow.
Atacama Desert, Chile
Footnotes and Sources
2. The Wall Street Journal, March 31, 2023
3. The Wall Street Journal, March 31, 2023
4. CNBC, March 31, 2023
5. IRS.gov, January 4, 2023
6. WebMD.com, November 16, 2022
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Weekly Market Insights: Banking Crisis Fears Dim; Markets Rally
April 03, 2023