Silicon Valley Bank closed last week due to massive losses in its bond portfolio. The bank’s failure sparked fears of contagion. Federal Reserve Chairman Jerome Powell said the Fed would raise interest rates in higher steps to control inflation if needed. This week, investors will get updates on inflation, retail sales, and consumer sentiment before the Fed meets to set interest rates during the week of March 20.
Silicon Valley Bank, a regional lender focusing on the technology industry, closed last week due to massive losses in its bond portfolio, sparking fears of contagion. Silicon Valley Bank is the largest U.S. bank to fail since Washington Mutual in 2008.
Testifying to Congress this week, Federal Reserve Chairman Jerome Powell said the labor market is “extremely tight” despite the Fed’s efforts to cool economic growth. Powell said the Fed is prepared to raise interest rates rapidly to control inflation if needed.
The economy added 311,000 jobs in February, with average hourly wages rising by 0.2%. Economists surveyed by Dow Jones forecast 225,000 job additions, with average hourly wages rising 0.3%. The unemployment rate inched up to 3.6% from 3.4% in January.
For the week ending March 10, the S&P 500 (SPY) fell 4.5%. All 11 sectors declined. Consumer staples (XLP) lost the least, while financials (XLF) lost the most.
The S&P 500’s top 10 winners included the following:
1. Industrial Sector
- General Electric (GE) +5.4% – The week’s top performer in the S&P 500.
- C.H. Robinson Worldwide (CHRW) +1.3%
2. Information Technology Sector
- Arista Networks (ANET) +4.1%
- Intel Corp. (INTC) +3.1%
- Advanced Micro Devices (AMD) +1.4%
- Juniper Networks (JNPR) +0.4%
3. Consumer Discretionary Sector
- Chipotle Mexican Grill (CMG) +2.7%
- D.R. Horton (DHI) +1.4%
4. Consumer Staples Sector
- The Kroger Co. (KR) +2.4%
5. Health Care Sector
- Merck & Co. (MRK) +0.8%
Top ETFs for the week
The following ETF themes worked well: carbon credits and long-term treasury bonds. The top ETFs for the week include:
- KraneShares Global Carbon ETF (KRBN) +5.6%
- PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ) +4.6%
- Vanguard Extended Duration Treasury Index Fund ETF Shares (EDV) +4.5%
- iShares 20+ Year Treasury Bond ETF (TLT) +3.6%
- Vanguard Long-Term Treasury Index Fund ETF Shares (VGLT) +3.6%
Will Stocks Sink to a New 2023 Low This Week?
* The S&P 500 broke below its 50- and 200-day moving averages last week to close within 2% of its 2023 low set in early January. The Dow Jones Industrial Average sank to a new 2023 low last Friday. Investors have plenty to digest this week, including banking industry risks and inflation data. Will the S&P 500 drop to a new 2023 low this week?
* Investors will get the latest inflation readings in consumer and producer prices on Tuesday and Wednesday, respectively. Economists expect the core Consumer Price Index (which excludes food and energy prices) to rise 0.4% in February, matching the rate in January. The core CPI is expected to reflect a 5.5% year-over-year increase in February, slightly lower than the 5.6% increase in January.
* Economists forecast the core Producer Price Index to rise 0.4% in February. The core PPI rose 0.6% in January.
* Other economic data due this week includes the Commerce Department’s retail sales report for February, the Conference Board’s U.S. Leading Economic Index for February, and the University of Michigan’s preliminary consumer sentiment reading for March.
* Four consumer companies in the S&P 500 will report earnings this week. They are Adobe, Dollar General, FedEx, and Lennar.
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