March 17, 2023
Good morning,
Yesterday’s equity market rally, largely driven by various rescue solutions for key European and U.S. banks lying in their respective ICU units, continued into the overnight session. That is right until Credit Suisse (CS) and Union Bank of Switzerland (UBS) denied rescue and any interest in combining at 4am ET. Markets have been in decline since. On our shores, SVP officially filed for Chapter 11 Bankruptcy this morning, and traders are questioning whether yesterday’s First Republic Bank (FRC) rescue package ($30 Billion of deposits for 120 days) is enough. FRC is down about 20% from yesterday’s close in pre-market trading this morning. If market prices are any indication, U.S. investors went to sleep last night feeling that the regional bank liquidity crisis was handled but learned this morning – not so much.
S&P Futures are off -.75% an hour before the open. It has been that kind of week. And yet, beneath all the scary failing bank headlines dominating investor’s attention all week, the S&P 500 Index is up +2.56% for the week through yesterday’s close. Any new bank headlines (or even rumors), and chaos normally thrown up by quarterly expirations in all things derivative (today is a quarterly expiration) will likely lead to another volatile day to close the week.
If regulators can stop the hemorrhaging regional bank liquidity problem, markets can turn their attention back to the Fed, its tightening cycle, and next week’s Fed meeting. We’ll cover that on Monday. Have a peaceful weekend (fingers crossed).
Be well,
Mike