U.S. stocks closed lower on Friday,17^th March 2023, together with bond yields, capping a volatile week as concerns of stress in the banking sector may indicate a recession is looming. 

Following a relief rally in regional bank stocks, investors pulled back and selling started to creep in again. A commitment from banks to deposit USD 30 billion into regional banks prevented a potential collapse in some regional banks like First Republic. 

Despite the down day, the S&P closed 1.4% higher for the week, and the Nasdaq rallied 4.4% as investors sought cover by buying into tech instead of financial stocks. The fall in yields also helped Tech share valuations.  

Here are the closing levels on Friday, 17^th March 2023:

	Last	Change	%Change
Dow Jones	31,861.98.	-384.57.	-1.19%
S&P 500	3,916.64.	-43.64	-1.10%
Nasdaq Comp	11,630.51.	-86.77	-0.74%
U.S. 10Y	3.43%
VIX	25.51	+2.52	+10.96%

The stress seen in the banking sector following the collapse of SVB continued to be front and centre of market moves. The dramatic fall in yields, specifically 2-yr yields, suggests that the Feds may cut rates very soon. 

Some investors interpret this as the market telling the Fed to stop rate hikes and cut rates instead. 

Nomura is one bank that is calling for a cut at next week’s Fed meeting. Many others are calling for a pause while some still expect a 25-basis point hike. 

Going by what the ECB did last week, a 25-basis point hike should not come as a surprise. 

Regardless, even if we were told in advance what the Fed will do next week, we would not be able to predict what the markets will do. 

That is the reality we have seen these last few weeks. The market tends to read what it wants to and reacts the way it wants to. 

So, it may be pointless to predict next week’s moves and instead be prepared for more volatility. 

Source: CBOE, Bloomberg. 

This commentary is written by James Gomes.
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years.

Risk Disclosure
Trading in financial instruments involves high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding the investor’s initial investment could incur within a short period of time. The past performance of a financial instrument is not an indication of its future performance. Investments in certain services should be made on margin or leverage, where relatively small movements in trading prices may have a disproportionately large impact on the client’s investment and the client should therefore be prepared to suffer significant losses when using such trading facilities.

Please make sure you read and fully understand the trading risks of the respective financial instrument before engaging in any transaction with Doo Prime’s trading platforms. You should seek independent professional advice if you do not understand any of the risks disclosed by us herein or any risk associated with the trade and investment of financial instruments. Please refer to Doo Prime’s Client Agreement and Risk Disclosure Statement to find out more.

[Disclaimer]
This information is addressed to the general public solely for information purposes and should not be taken as investment advice, recommendation, offer, or solicitation to buy or sell any financial instrument. The information displayed herein has been prepared without any reference or consideration to any particular recipient’s investment objectives or financial situation. Any references to the past performance of a financial instrument, index, or a packaged investment product shall not be taken as a reliable indicator of its future performance. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, make no representation or warranties to the information displayed and Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners and their respective employees, as well as managers, shall not be liable for any direct, indirect, special or consequential loss or damages incurred a result of any inaccuracies or incompleteness of the information provided. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, shall not be liable for any direct, indirect, special, or consequential loss or damages incurred as a result of any direct or indirect trading risks, profit, or loss arising from any individual’s or client’s investment.