What you need to know this week

March has long been expected to serve as a pivotal month for the Federal Reserve.

And after the first two weeks of the month brought the central bank a year’s worth of headlines, the coming week finally brings what investors expected to be the main event.

On Wednesday, the Fed will announce its latest monetary policy decision at 2 p.m. ET, with Fed Chairman Jerome Powell set to follow that announcement with a press conference at 14:30 ET. Alongside its policy decision, the Fed will also publish updated forecasts for inflation, unemployment, economic growth and interest rates for the rest of this year and beyond.

After Powell testified before the Senate Banking Committee on March 7 that the Fed was likely to raise interest rates “higher than previously expected” in response to stubborn inflation, investors were all but certain that the Fed would raise the target range of its benchmark interest rate by 0.50% on 22. of March.

Two days later, an incipient banking crisis cast a shadow over the Fed’s plans. On Sunday evening, March 12, the Fed was part of a government-led backstop of deposits across the US financial system. Investors are now roughly divided on whether the Fed will raise interest rates at all on Wednesday.

“We still expect the Fed to raise its key interest rate by 25 basis points next week, but also convey a less stringent inflation-fighting message than thought a few weeks ago, aimed at allaying market anxiety,” wrote Bob Schwartz, senior economist at Oxford Economics. in a note to clients on Friday.

“While the banking problems will certainly attract attention, we believe it is not systemic but more of a liquidity problem that the Fed can contain with its lending facilities,” Schwartz added. “The wildcard going forward will be the reaction in the financial markets, as maintaining financial stability is one of the Fed’s mandates.”

File – Federal Reserve Chairman Jerome Powell speaks during a news conference Wednesday, Dec. 14, 2022, at the Federal Reserve Board Building in Washington. As the primary regulator of Silicon Valley banks, the Federal Reserve comes under sharp criticism from financial watchdogs and banking experts. (AP Photo/Jacquelyn Martin, File)

Last week, government officials, regulators and private sector banking executives scrambled to stabilize the U.S. financial system following the rapid collapse of Silicon Valley Bank and the seizure of Signature Bank.

The week’s key development came Thursday afternoon when a consortium of 11 US banking giants announced they would transfer about $30 billion in deposits to First Republic (FRC), which investors and regulators feared would be the next institution to fail.

Even with last week’s capital injection, First Republic shares lost over 70%; On Friday alone, the stock fell about 33 percent.

Amid this flurry of banking news, major U.S. stock indexes finished the week mixed, with the Nasdaq Composite (^IXIC) up more than 4%, the S&P 500 (^GSPC) up 1.4% and the Dow Jones Industrial Average (^DJI) logging modest losses.

However, financial stocks were hit hard, with the KBW Bank Index (^KBX) down more than 14% for the week, while the KBW Regional Bank Index (^KRX) lost just over 9%. Since the start of March, these indices have lost 27% and 17% respectively.

Over the weekend, US investors kept an eye on Europe, with recent reporting from the Financial Times suggesting that UBS ( UBS ) was nearing a deal to acquire Credit Suisse ( CS ) in a $1 billion deal that would value Credit Suisse at around 0.27 dollars. stock. Credit Suisse shares traded in New York closed Friday’s session at $2.01.

While developments from the Federal Reserve and global banking will remain top of mind for investors, a number of economic and earnings reports will attract attention throughout the week.

Existing home sales data out on Tuesday and Wednesday morning’s weekly update on mortgage applications will offer readings on the housing sector, which has been an unexpected beneficiary of the banking crisis due to the collapse in Treasury yields and the resulting fall in mortgage rates.

Investors will also keep a close eye on Thursday morning’s reading on services and manufacturing activity from S&P Global.

On the earnings side, results from Foot Locker ( FL ) on Monday, Nike ( NKE ) on Tuesday, Darden Restaurants ( DRI ) on Thursday will offer updates on the state of the US consumer.

Financial calendar

Monday: No notable dataset for release.

Tuesday: Existing home sales, February

Wednesday: MBA mortgage applications; The Federal Reserve’s monetary policy decision

Thursday: Initial unemployment claims; New home sales, February; Kansas City Fed Manufacturing Index

Friday: Orders of durable goods, February; S&P flashes composite PMI in the US

Earnings calendar

Monday: Foot Locker (FL), Pinduoduo (PDD)

Tuesday: Nike (NKE), GameStop (GME), Tencent Music (TME), AAR Corp. (AIR)

Wednesday: Ollie’s Bargain Outlet (OLLI), Chewy (CHWY), Petco (WOOF), Winnebago (WGO), Steelcase (SCS), Worthington Industries (WOR), KB Home (KBH)

Thursday: General Mills (GIS), Darden Restaurants (DRI), Accenture (ACN), FactSet (FDS)

Friday: No notable companies are expected to report.

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