What our experts think about the recent market action.
Bruce Blythe, Ticker Tape Contributor
(Monday market close)
The broader U.S. stock market was little changed Monday, despite the turmoil in the financials sector following the collapse of three banks in recent days, as investors weighed the possibility the Federal Reserve might pause its rate-hiking campaign to take pressure off the financial system.
Shares of banks and other financial companies continued to struggle Monday, even after reassurances of support over the weekend from government regulators and the Fed, but the food and beverage, health care, mining, retail, and technology sectors all delivered gains. Treasury yields extended their fall from last week as demand from investors seeking perceived safe-haven investments pushed up bond prices.
Beyond the situation in the banking industry, investors are awaiting the release of updated inflation and retail sales data this week as well as the Fed’s next policy meeting on March 21-22.
“Markets may soon return to worrying about inflation and rate hikes,” said Jeffrey Kleintop, Schwab’s chief global investment strategist.
The following is a round-up of today’s market activity:
The collapse of Silicon Valley Bank on Friday, followed in quick succession by the failures of crypto-exposed Silvergate Capital Corp. and Signature Bank, have raised concern over potential financial market contagion. However, the Treasury Department, the Fed, and Federal Deposit Insurance Corporation (FDIC) have enacted several measures to contain the issue.
Jeff said he doesn’t expect the situation to lead to a 2008-2009-style crisis.
“Inflation and central bank rate hikes are likely to remain the main risks facing the stock market this year, rather than a financial crisis,” he added.
Investors will also be looking for any sign the Fed might be willing to back off its aggressive anti-inflationary monetary policy footing.
Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, said a pause in rate hikes could be possible.
“Financial stability trumps inflation concerns for now. Further tightening wouldn’t be consistent with trying to shore up liquidity in the financial system and calm markets,” she said. “The Fed has already tightened enough to trigger financial stress. That is a sign it’s time to back off.”
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