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The Fed hiked rates 25 bps despite recent banking failures, and banking stocks had some things to say about the news.

Let’s keep it concise.

Market Headlines 👀

• The Fed hikes interest rates by 25 bps (est. 25 bps). 

• US 30-Year mortgage rate falls to a five-week low of 6.48%.

• Apollo (APO), Carlyle (CG) scour bankrupt SVB (SIVB) financials for loan deals.

• SoFi (SOFI) to increase FDIC insurance coverage from $250K to $2M.

• PacWest (PACW) bolsters liquidity after clients pull 20% of deposits.

• SVB’s (SIVB) loans to insiders tripled to $219M before it failed.

• JPMorgan (JPM) says Treasuries coping amid the worst liquidity since 2020.

• Carvana (CVNA) plans $1B debt exchange in restructuring bid.

• Tesla (TSLA) prepares its latest page-turner proxy with eyes on Elon Musk.

• UK inflation rate breaks 3-month stretch of declines with surprise rise to 10.4%.

• US officials talked about raising deposit insurance without Congress.

• US SEC delays vote on private investment reporting rule.

Earnings 💸

• Chewy (CHWY)

  • EPS: $0.01 beats (exp. -$0.11)

  • Revenue: $2.71B beats (exp. $2.64B)

• Petco (WOOF)

  • EPS: $0.23 misses (exp. $0.24)

  • Revenue: $1.57B inline (exp. $1.57B)

Recap Around the Street 🧠

The Fed raised interest rates by 25 basis points (bps). Its target range is now 4.75%-5.0% – the highest level since 2007. The decision was unanimous and came at the end of the Fed’s Open Market Committee (FOMC) today.

As a reminder, the Fed had increased its key rate for eight straight meetings, bringing the federal funds rate target range from 0.0%-0.25% to 4.50%-4.75% in the past year. The core PCE price index, the Fed’s preferred inflation signal, jumped to 4.7% year-over-year in February. That was up from 4.6% in January, but easing from 5.2% in March 2022.

Efforts to shrink the Fed’s balance sheet were upended last week, as financial institutions borrowed a whopping $153B from the Fed's discount window (and $12B from the newly created Bank Term Funding Program). That being said, assets from emergency lending tend to fall as soon as a crisis subsides.

Ultimately, things will boil down to whether banking contagion has been limited to a handful of regional banks, or if something systematic has broken.

Almost 800 companies have shed 473,000 jobs since October 2022. Although substantial layoffs at tech giants like Meta (META) and Microsoft (MSFT) dominate headlines, they don’t tell the whole story.

Layoffs by US companies over January and February touched the highest since 2009, per a Reuters report last week. The number of Americans filing new claims for unemployment benefits rose 21,000 in the week ending March 4 – the biggest increase in five months.

There have been 149.3K layoffs in the tech sector (~31.6%), followed by 108.7K in consumer discretionary (~23%), 49.8K in financials (~10.5%), 48.6K in industrials (~10.3%) and 43.6K in communications (~9.2%). Note the financials sector numbers do not yet include recent bank failures, nor the jobs at risk from UBS’ (UBS) recent buyout of Credit Suisse (CS).

Market Preview 🎞️

• Thursday: US new home sales; initial jobless claims; BOE rate decision; Eurozone consumer confidence; EU leaders meet in Brussels for a two-day summit; US Treasury Secretary Yellen testifies on the budget to a House Appropriations subcommittee

• Thursday earnings: General Mills (GIS), Accenture (ACN), Darden Restaurants (DRI), FactSet Research (FDS), Gambling.com Group (GAMB) and Equinor SA (EQNR)

• Friday: US durable goods; European Flash PMIs; Japan CPI & PMI; BOE’s Mann speaks

• Friday earnings: Express (EXPR)

That’s all for today, folks! We’ll be back around the same time tomorrow with a curated list of important news, economic data and market highlights. 

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