market

Fed cuts rate, and Regional banks tumbled, once more

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It was an expected rate cut of 0.25%. However, Uncle Powell stopped short of calling a rate cut at the end of the year while re-affirming the Fed’s dual mandate and a laser focus to bring inflation down to 2%.

This caused Treasuries to fly higher across various spectrums of the curve, with the 10-year Treasury yield falling to around 3.401%, dropping around 4 basis points. The late drop in bond yield can be seen as a reflection of the growing uneasiness of a deep recession. This motivates investors to buy up Treasuries, which are seen as a safe haven, and push yield down.

A hawkish tone during the press conference

While Uncle Powell highlighted the removal of further hikes from the statement, he did state that the Fed is “prepared to do more if greater monetary policy restraint is warranted.”. This could also mean in the form of a balance sheet runoff rate.

Hence, there is little dovishness in the statement.

PacWest dropped the bomb on the market.

The company shares fell sharply in the after-hours as reports surfaced that the bank is considering strategic options, including a possible sale. This creates market jitter again as worry about shareholders being wiped out.

We have taken a loss on all our PacWest shares and still have options exposure. We will consider an exit plan or cut loss as deemed fit but are prepared to consider the losses. Also, we will likely take damage from our regional banks’ ETF.

It will be a delicate move as we pare down our bank stocks while maintaining our BAC exposure thus far.

What’s on the menu today?

8.30 pm: Initial Jobless Claims, Unit Labor Costs

It is 4 May, Thursday, 9 am in Singapore and 9 pm in New York. What a ride on the equity market as our portfolio swung between gains and losses and fell red as the market sell-off gained momentum.

We hope you have a safe day and a fruitful time in school and work.