[New York Stock Market] Banks Rise Together as Concerns Ease... The Key Issue Is Inflation

The three major indices of the U.S. New York stock market all closed higher on the 30th (local time) as concerns over the banking sector crisis eased and investor sentiment recovered. Market attention is now focused on the major inflation indicator, the February Personal Consumption Expenditures (PCE), which will be released the following day.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,859.03, up 141.43 points (0.43%) from the previous session. The large-cap S&P 500 index rose 23.02 points (0.57%) to 4,050.83, and the tech-heavy Nasdaq index gained 87.24 points (0.73%) to close at 12,013.47.

All 10 sectors of the S&P 500, excluding financial stocks, showed gains. In particular, real estate and technology stocks surged more than 1%, leading the rally. Apple rose 0.99%, and Amazon increased 1.75% compared to the previous session. Buoyed by optimism in the semiconductor industry, Nvidia (+1.48%), AMD (+1.86%), Intel (+1.81%), and Qualcomm (+1.85%) also advanced.

On the other hand, financial stocks declined as U.S. Treasury Secretary Janet Yellen and President Joe Biden consecutively confirmed plans to strengthen banking regulations. Charles Schwab, which has been engulfed in crisis rumors following the Silicon Valley Bank (SVB) collapse, fell nearly 5% after Morgan Stanley downgraded its investment rating. Additionally, Bed Bath & Beyond dropped more than 26% after issuing another warning that it might file for bankruptcy.

[Image source=Reuters Yonhap News]

Investors are closely monitoring major economic indicators and statements from Federal Reserve (Fed) officials amid easing concerns over the banking sector. Economic media outlet CNBC reported that investors are betting the worst of the recent banking crisis fears has passed. Following the release of unemployment and growth figures on this day, the Fed-preferred PCE price index and University of Michigan consumer sentiment data will be announced the next day. The February PCE price index is estimated to have risen 4.7% year-over-year and 0.4% month-over-month. Michael O’Rourke, Chief Market Strategist at JonesTrading, commented, "The market will shift its focus to inflation data over the next few days."

The weekly U.S. initial jobless claims released on this day rose by 7,000 to 198,000 compared to the previous week, exceeding the market forecast of 195,000. Some market participants expressed hope that the Fed might adjust the pace of tightening based on these employment figures. However, claims remained below 200,000 for the third consecutive week, maintaining historically low levels.

The U.S. economic growth rate for the fourth quarter of last year was slightly revised downward, reflecting weakened consumer spending and export performance. The U.S. Department of Commerce reported that the GDP growth rate for Q4 was 2.6% annualized. This figure was further downgraded from the preliminary 2.9% and revised 2.7%. This has been interpreted as evidence that the Fed’s tightening policy is effectively lowering inflation, bolstering expectations that interest rate hikes are nearing their end.

In the afternoon, remarks from Fed officials such as Susan Collins, President of the Boston Federal Reserve Bank, and Thomas Barkin, President of the Richmond Federal Reserve Bank, were released. At the National Association for Business Economics (NABE) meeting in Washington, Collins stated, "Inflation remains too high," and confirmed her support for tightening, saying, "There is still much work to be done." She added, "I expect some additional tightening and then maintaining this level through the end of the year." Barkin, in a separate speech, warned, "If we retreat too quickly on inflation, the Fed will have to take more actions, which could cause more damage." However, neither holds a voting right at this year’s FOMC.

The following day, Fed Governor Lisa Cook and John Williams, President of the New York Federal Reserve Bank, are scheduled to speak. Investors are expected to seek further clues about the Fed’s future interest rate path from their remarks.

Currently, the market is divided between expectations that the Fed will hold rates steady at the May FOMC meeting and those anticipating a baby step (a 0.25 percentage point rate hike). According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures market prices reflect a greater than 51% probability that the Fed will take a baby step at the May FOMC. The probability of a rate hold stands at 48.2%.

Investors are also watching for potential regulatory tightening targeting medium-sized and larger regional banks following the SVB incident. Treasury Secretary Yellen said regarding the SVB and Signature Bank failures, "This event reminded us of the urgency to complete unfinished work," adding, "We need to finish reforms after the financial crisis, review whether deregulation has gone too far, and repair regulatory gaps exposed by recent shocks." She also criticized the previous Trump administration for having "decimated" the strengthened financial regulations and supervision established after the global financial crisis. On the same day, the White House issued a press release stating that President Biden has directed increased liquidity and capital requirements for regional banks with assets over $100 billion and mandated annual regulatory reviews.

In the New York bond market on this day, the yield on the U.S. 2-year Treasury note, sensitive to monetary policy, hovered around 4.1%, while the 10-year yield was near 3.55%. The dollar index, which measures the dollar’s value against six major currencies, fell more than 0.4% to 102.1. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," dropped about 4% to 19. The fear index had surged to 30 in mid-March due to the SVB crisis but has since recovered to previous lows.

International oil prices rose due to concerns over export disruptions in Iraq. On the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude oil closed at $74.37 per barrel, up $1.40 (1.92%) from the previous session. Next week, ahead of the OPEC+ ministerial meeting, the Joint Ministerial Monitoring Committee (JMMC) will convene.

This content was produced with the assistance of AI translation services.