Stock Market News for Mar 17, 2023

·4-min read

U.S. stock markets closed sharply higher on Thursday as three major stock indexes ended in positive territory offsetting stiff losses in the early trading period. The negative effect of a higher-than-expected rate hike by the ECB was more than offset by developments to restore investors’ confidence in the U.S. and global banking system. Economic data were mixed.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) advanced 1.2% or 371.98 points to close at 32,246.55. At intraday low, the blue-chip index was down more than 300 points. Notably, 26 components of the 30-stock index ended in positive territory and 4 in negative zone.

The tech-heavy Nasdaq Composite finished at 11,717.27, climbing 2.5% or 283.22 points due to strong performance of large-cap technology stocks. The S&P 500 surged 1.8% to end at 3,960.28. All 11 broad sectors of the benchmark index closed in positive territory. 

The Technology Select Sector SPDR (XLK), the I Communication Services Select Sector SPDR (XLC) the Financials Select Sector SPDR (XLF) and the Consumer Discretionary select Sector SPDR (XLY) appreciated 2.8%, 2.3%, 1.9% and 1.8%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was down 12.1% to 22.99. A total of 12.8 billion shares were traded on Thursday, higher than the last 20-session average of 11.90 billion. Advancers outnumbered decliners on the NYSE by a 2.80-to-1 ratio. On Nasdaq, a 1.95-to-1 ratio favored advancing issues.

Banking Sector Stabilizes

U.S. stock markets tumbled in early trading session following the decision of the European Central Bank (ECB) – the central bank of the 20-member Eurozone – by 50 basis points. Most of the economists and financial experts expected a lower rate hike following recent turmoil in the global banking system. For February, the preliminary data for Eurozone inflation came in at 8.5%, well above the ECB’s 2% target  rate.

Per the ECB, “Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points.” The ECB projected inflation to average at 5.3% in 2023 followed by 2.9% in 2024.

However, the situation changed in the second half of trading following news that a consortium of 11 major U.S. banks will deposit $30 billion in the struggling First Republic Bank FRC to fulfil its short-term obligations. Consequently, shares of First Republic surged 10%.

Last week, two big regional banks, namely Silicon Velley Bank and Signature Bank collapsed due to massive withdrawal of deposits. Corporate clients of these banks withdrew deposits rapidly in order to run their businesses as higher interest rate regime dried up fund raising sources from market.

On Mar 15, the global financial markets were rattled by Credit Suisse Group AG CS. Earlier this week, the bank reported that it had found “certain material weaknesses in our internal control over financial reporting for the years 2021 and 2022.” The bank also stated that depositors have withdrawn more than $120 billion in fourth-quarter 2022. However, the Swiss lenders largest investor, the Saudi National Bank declined to invest more.

The situation stabilized to some extend after the Swiss Financial Market Supervisory Authority and the Swiss National Bank said in a statement that the bank “meets the capital and liquidity requirements imposed on systemically important banks.” The Swiss central bank also decided to step in if situation needs. Credit Swiss has decided to borrow up to $54 billion from Swiss National Bank.

Credit Swiss current carries a Zacks Rak #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Department of Labor reported that weekly jobless claims decreased 20,000 to 192,000 for the week ended Mar 11, lower than the consensus estimate of 206,000. Previous week’s data was revised marginally upward from 211,000 to 212,000. Continuing Claims (those who already received government benefit) for the week ended Mar 04, came in at 1.684 million — a decrease of 29,000 from downward revision of 1.713 million in the previous week.

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced that housing starts in February came in at seasonally adjusted annual rate of 1.45 million units, beating the consensus estimate of 1.312 million units. January’s data was revised upward to 1.321 million units from 1.309 million units reported earlier. Building permits in February came in at seasonally adjusted annual rate of 1.524 million units, beating the consensus estimate of 1.34 million units.

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