North American News
US stocks tumble into the close
The major US stock indices took a sharp tumble to the downside in the last minutes of trading closing at session lows. And so did yields. They too are closing/trading near the lowest levels of the day.
The Federal Reserve hiked rates by 25 basis points and kept the terminal rate of 5.1% for the end of 2023. The Fed chair said that the overwhelming view is that rates will not come down until 2024 sometime (they see 4.3% as the ending rate in 2024). Despite that view, yields came tumbling down, and stocks reacted to the upside:
- Dow industrial average reached a high of 201.28 points
- S&P index reached a high of 36.63 points
- NASDAQ index reached a high of 153.88 points
However as the day started to come to a close, selling in stocks kicked in. The closing levels are showing:
- Dow Industrial Average Minus -530.49 points or -1.63% at 32030.12
- S&P index -65.88 points or -1.65% at 3936.98
- NASDAQ index -190.14 points or -1.60% at 11669.97
- Russell 2000-50.38 points or -2.83% at 1727.35
Meanwhile the debt market, yields reacted negatively to the stocks declines. A snapshot of the yield curve near the close shows:
- two year yield 3.932%, -24.5 basis points
- five year yield 3.508% -23.5 basis points
- 10 year yield 3.436% -17 basis points
- 30 year yield 3.655% -8.1 basis points
FOMC dot plot and central tendencies from March 2023 meeting. EOY 2023 5.1%
- The dot plot for 2023 shows end of year 2023 at 5.1% vs 5.1% in December 2023
- The Dot plot from March 2023 show the median rate at the end of 2023 at 5.1% vs 5.1% at the December 2022 projections
- For 2024, the median fed funds target rate is 4.3% vs 4.1% in December
- For 2025, the median fed funds target rate is 3.1% vs 3.1% in December
The dot plot from March 2023:
The table of central tendencies from March 2023 shows:
Powell Q&A: Before the banking issues, it looked like we would have to raise rates higher
- Comments from Powell in response to questions from the press
- A couple of weeks ago, we thought we would have to raise terminal rate
- We could think of the banking turmoil as a rate hike, or perhaps more than that
- Some firming refers to our policy rate. I would focus on the words ‘may’ and ‘some’
- It’s possible banking issues could have minimal effect or that it could result in significant tightening, we just don’t know
- We don’t know how significant or sustained this period of credit tightening will be but we think it’s quite real
- We don’t yet see progress on core services inflation excluding housing
- Disinflation is absolutely occurring
- It would be inappropriate to offer views on needed changes due to SVB
- These aren’t weaknesses that are broad through the banking system
- At the end of the day, we will bring inflation down to 2%, no one should doubt that
- Doesn’t see similarities to concentration at SVB to commercial real estate at other banks
- If we have to raise rates higher, we will
- Right now we see the likelihood of credit tightening, also notes labor market
- It’s hard to see how bank stresses would have improved the likelihood of a soft landing
- We haven’t talked about changing balance sheet implementation
Commodities
Crude inventory shows a build of 1.117M versus a draw of -1.565M estimate
- Oil inventory data for the current week
- Crude inventory shows a build of 1.117M versus a draw of -1.565M
- Gasoline showed a drawdown of -6.400 million versus -1.677 million estimate
- Distillates showed a drawdown of -3.313 million versus estimate of -1.500 million estimate
- Cushing -1.063 million versus -1.916 million previously
- EIA production 12.3 million barrels which is up 100,000 barrels per day or +0.82%
- Refinery utilization 0.4% versus 1.0% estimate
OPEC+ reportedly likely to stick to existing deal until the end of the year
- Reuters reports, citing three delegates from the bloc
That comes despite the latest slump in prices, in which we saw WTI crude break back below $70 this week. The sources reported say that OPEC+ is to stick to its deal on output cuts of 2 million bpd until year-end. For now, it looks like Russia is the only one acting to cut down on production.
“This is only a unilateral cut of Russia. No changes for the group until the end of year.”
EU News
European equity traders head to the exits with mixed results
- Spain and Italy marginally lower
A major European indices or ending the day with mixed results ahead of the FOMC rate decision at 2 PM, and the BOE rate decision tomorrow morning.
The final numbers are showing:
- German DAX up 0.14%
- France’s CAC up 0.26%
- UK FTSE 100 up 0.41%
- Spain’s Ibex down -0.44%
- Italy’s FTSE MIB -0.04%
The ECB’s Nagel delivers some bold words
- ECB’s Nagel: Further rate hikes needed in coming meetings if inflation follows forecasts
- ECB’s job not yet done, bank must be bold and decisive
- Inflation projections contain upside risks, wages may rise more strongly than assumed
- Bank sector resilient, contagion risks to eurozone banks low
- Expansionary fiscal measures risk fuelling inflation further
Other News
Yellen: We’re not considering a broad increase in deposit insurance
- That’s an interesting comment
The KRE regional bank ETF is now at the lows of the day, down 3.4% and this comment from Yellen won’t help. The question is whether this now spreads to the broader market.
BoA have cut its terminal Fed Funds forecast to 5 – 5.25% (from 5.25 – 5.5%)
In the wake of Wednesday’s Federal Open Market Committee (FOMC) +25bp rate hike and Powell’s press conference.
BoA:
- We take on board a greater tightening in lending standards, which could substitute for policy rate tightening
- We now project one more 25bp rate hike for a terminal range of 5.0-5.25%, down 25bp from our prior target terminal range
Cryptocurrency News
Justin Sun and eight celebrities charged for TRON
- SEC charges Sun for fraud and celebrities for not disclosing payment
The US Securities and Exchange Commission charged Justin Sun and several celebrities with alleged wash trading and illegal touting of tronix and BitTorrent tokens, which it describes as unregistered securities.
Sun is alleged to have directed employees to “engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled.”
TRON is down 13.5% on the news
The celebrities sued for promoting TRON without disclosing they were being paid are:
• Lindsay Lohan
• Jake Paul
• DeAndre Cortez Way (Soulja Boy)
• Austin Mahone
• Michele Mason (Kendra Lust)
• Miles Parks McCollum (Lil Yachty)
• Shaffer Smith (Ne-Yo)
• Aliaune Thiam (Akon)
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