Stocks found footing during late trading session

Equity markets were largely lower on Wednesday as Credit Suisse deteriorating financial condition and financial controls posed worry among investors after traders tried to move ahead of the Silicon Valley Bank and Signature Bank collapse.

The Swiss government had announced its intention to support Credit Suisse with liquidity if necessary, potentially pushing back a potential banking crisis unfolding. This helped the Nasdaq to be back into the green territory.

Throughout the session, we saw S&P 500 struggling to move higher partly because its bank weightage is pulling it down from higher.

Financial accidents persist, and the Fed is in focus.

While central bankers worldwide have been releasing statements to show confidence in their banking system, the wounds remain fresh and alive. Banks typically thriving in a high-interest rate environment are battled with an inverted yield curve.

Recall in our usual narrative; banks tend to borrow at the short-term interest rate, such as the 2-year treasury yield and lend at long-term rates, such as the 10-year treasury yield. An inverted yield curve where the short-term interest rate is higher than the long-term interest rate poses challenges to a financial institution’s lending and balance sheet, crippling the agility of its liquidity and hammering confidence.

The Fed will likely push ahead with an incremental rate hike to protect its credibility in the fight against inflation as it tries to ring-fence the spillover effect of the SVB saga to the wider financial condition.

Economic data showing signs of possible further easing in inflation

Likewise, as we look at the latest Producer Price Index (PPI), we are seeing sign of slowing inflation. As PPI unexpectedly slowed more than expected, a weaker retail sales figure gave the Fed some breathing space to navigate the stormy sea that was once worried to be a tsunami or torrential rain falling on Wall Streets.

The weakening in spending trajectory can potentially help cool off service sector inflation as the economy is fragile and tipping down the recession cliff. A valley ,so deep and unknown that few would want to cross the uncharted route.

What’s on the menu today?

At 8.30 pm, we will have the building permit data. We should see a firm level at 1.34M.

The import price index for Feb is likely to see a decline of 0.2%, similar to the prior period too when released at the same time.

Initial Jobless Claims were known concurrently. We are looking at 205K, not far off from 211K previously. This is critical to further show signs of easing in the labour market.

The Philadelphia Fed Manufacturing Index will also hit the news, showing a further decline of -15.6 compared to -24.3 in the previous reporting.

It is 16 March, 9 am in Singapore and 9 pm in New York. We continue to see headwinds in a world full of geopolitical risk, cracks in financial stability and an increasingly polarised world where consensus are tougher to reach and hold as we work to recover our precarious positions.

From your lovely trading buddy.