Two key economic data points ahead of the next Federal Reserve meeting will greet investors in the coming week as the eyes of the investing public – and beyond – will remain on the latest developments in the aftermath of last week’s Silicon Valley bank collapse .
Tuesday’s February consumer price index (CPI) and February retail sales data released Wednesday morning are likely to shore up investors’ expectations for the Fed’s next monetary policy move.
Consensus forecasts are for the consumer price index to rise 6% yoy on an aggregate basis and 5.5% on a core basis in February, according to Trading Economics data. A 6% rise in inflation would be the slowest annual rise in consumer prices since September 2021.
However, investor focus on the Fed’s next moves became the top focus in recent days with the shock collapse of the Silicon Valley bank on Friday and fears over what the second-largest banking collapse in US history could mean for the financial system as a whole investors .
How futures open on Sunday evening and what the implications, if any, have for Monday’s trading session will be crucial in setting the tone for the week ahead. And it will provide an indication of whether investors will agree with many of the initial reactions to the Silicon Valley bank collapse — that it represents a one-off failure rather than the start of something bigger.
As reported by Yahoo Finance’s Jennifer Schonberger on Friday, TD Cowen analyst Jaret Seiberg wrote on Friday that the company “does not see this as the beginning of a broader threat to the safety and soundness of the banking system.”
“Similar to Silvergate (SI), Silicon Valley had a unique business model that was less dependent on retail deposits than a traditional bank,” added Seiberg. “This left the bank more exposed to interest rate risk as its funding became more expensive, but its assets were not valued higher.”
The story goes on
A view of the Park Avenue location of Silicon Valley Bank (SVB) in New York City, U.S. March 10, 2023. Portal/David ‘Dee’ Delgado
In a note to clients released Friday, Kabir Caprihan, an analyst at JPMorgan, echoed much of that sentiment, writing, “At first, we don’t think so [Silicon Valley Bank’s collapse] to be systemic, but it reflects some of the structural issues that we highlighted in our outlook that prompted our underweight to regional banks.”
The scale and unique challenges that brought Silicon Valley Bank to a halt are unparalleled — its involvement in the money-burning tech world, which has been the most punished by investors during the Fed’s rate-hiking campaign, tops that list. But the general story of deposit growth in 2021, outflows in recent months and losses in securities portfolios are likely to pose challenges for some regional banks in the near future.
According to a Bloomberg report late Saturday, the FDIC – which took control of the bank Friday morning – was working to complete some of the uninsured deposits held at the bank, with the outlet reporting payments were between 30% and 50% of deposits were discussed .
Fed and FDIC officials have also talked about creating a fund to protect deposits from other institutions that could face a crisis similar to Silicon Valley Bank in the coming weeks, Bloomberg reported. Across the Atlantic, UK Treasury Secretary Jeremy Hunt said the UK government was working to ensure that all UK companies facing liquidity needs as a result of the SVB’s failure “are able to meet their cash flow needs to run.” to pay their employees”.
Semafor reported over the weekend that hedge funds have been contacting startups with cash stuck at Silicon Valley Bank with offers to buy their deposits at a discount as some companies face a liquidity crunch as payroll looms and a potentially long one Road to recovery imminent on money deposited at failed bank.
This comes as regulators seek buyers for Silicon Valley Bank and the wealth management, investment and securities businesses of the bank’s former parent company SVB Financial (SIVB). Employees at the failed Silicon Valley bank will remain on the job for 45 days before being fired, Bloomberg reported on Saturday.
The FDIC’s latest update on the situation on Saturday evening states: “All depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay an advance dividend to uninsured depositors within the next week.”
The FDIC added, “Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells Silicon Valley Bank’s assets, future dividend payments may be made to uninsured depositors.”
“The circumstances of the Silicon Valley bank collapse are so unique that they are unlikely to trigger widespread financial contagion,” wrote Paul Ashworth, chief North America economist at Capital Economics. “Nonetheless, it’s a timely reminder that when the Fed focuses solely on keeping inflation down by raising interest rates — it often ends up breaking things.”
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economic calendar
Monday: No major economic releases planned.
Tuesday: CPI yoy, February (+6% exp. vs. +6.4% in January); CPI month-on-month, February (+0.4% exp. vs. +0.5% in January); “Core” CPI, YoY, February (+5.5% expected vs. 5.6% in January); “Core” CPI MOM vs. February (+0.4% exp. vs. +0.4% in January)
Wednesday: MBA Mortgage Applications; YoY producer prices, February (+5.4% exp. vs. 6% in January); Producer prices month-on-month, February (+0.3% exp. vs. +0.7% in January); “Core” PPI, YoY, February (+5.2% expected vs. +5.4% in January); “Core” PPI, Month vs. Month, February (+0.4% expected vs. 0.4% in January); Retail Sales MoM, February (-0.3% exp. vs. +3% in January); NAHB Home Builder Sentiment, March (42 expected vs. 42 in February)
Thursday: Building Permits, February (1.238m annualized rate vs. 1.339m in January); Housing Starts, February (1.31m annualized rate vs. 1.309m in January); Initial Jobless Claims (205k expected vs 211k last week); Philadelphia Fed Manufacturing Survey
Friday: Industrial Production, February (+0.4% expected vs. 0% in January); University of Michigan consumer sentiment, preliminary March measurement
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results calendar
Monday: GitLab (GTLB)
Tuesday: Lennar (LEN); Rate (GES); Sentinel One (S); StoneCo (STNE)
Wednesday: Adobe (ADBE); oats (OTLY); UiPath(PATH); Five below (FIVE)
Thursday: FedEx (FDX); Dollar General (DG); G-III clothing (GIII); Jabil (JBL); seal jewelers (SIG); Academy Sports (ASO); Williams Sonoma (WSM); Carrier (KOCH)
Friday: No significant earnings scheduled for release.
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