“Debit” – Credit Suisse Bank Run
Believe it or not, the S&P 500 rallied +1.47% last week even though trouble in the European banking sector surfaced. European banking issues pushed the Federal Reserve policy to the background and global bank liquidity to foreground. The Nasdaq, heavily weighted in technology and having very little weightings in banks, vastly outperforming the broader market amid the continued turmoil among banks and in the Treasury market. Flight to “safety” had Treasury bond yields rallying across all maturities. U.S. two-year yields were down 130 bps in the space of five trading days. This was the biggest yield rally in them since October 1987. In US equity markets, volatility spiked higher, but ex bank stocks, the overall indexes managed a green week with the Nasdaq rising last week (now up 11.1% YTD) and the S&P 500 up +2.4% YTD. The S&P 500 is down roughly -6% from its early February high and is now trading slightly below its 200-day moving average.
The S&P 500 index ended Friday’s at 3,916, up from Friday, March 10th, closing level of 3,861. The S&P 500 is up +2.4% for 2023 but down -1.3% for March to date. Technology stocks led to the upside last week as lower interest rates boosted the sector. The communication services sector had the biggest increase last week, climbing almost +7%, followed by a +5.7% increase in tech stocks and a +3.9% increase in utility stocks. Other positive sectors last week included consumer discretionary, health care, consumer staples and real estate.
The energy sector fell -7%, followed by a -6.1% drop in the financial sector with regional banks pulling the entire group lower. The materials sector also was down -3.5%, followed by a -2.5% decline in industrials.
The biggest gainers in technology and communication services were Facebook parent Meta Platform (META) climbing +9% on the week and Microsoft (MSFT) rising +12% as they disclosed new artificial intelligence-powered functionalities for its Microsoft 365 suite. 2022’s lead group, energy, dropped the most as oil futures fell for another week. Major declines were seen in Devon Energy (DVN), which fell -11% on the week, and APA Corp. (APA) and Schlumberger (SLB), down -12% each.
On the banking front, two major moves took place last week. First, U.S bank regulators took control of Silicon Valley Bank and Signature Bank, sparking liquidity concerns among other regional banks. Late last week banks tapped the Fed discount window for a record $152.9 billion, and the newly announced Bank Term Funding Program (BTFP) was tapped for another $11.9 billion. Secondly, long maligned Credit Suisse (decades of declines), suffered an accelerated bank run and was “forced” to merge with its rival UBS for only $3.2 billion in a merger facilitated by the Swiss regulators and government.
The OHFG YouTube channel is currently undergoing some placement modifications. For now, “Stock Talk” can be found by clicking on this link and subscribing to its own content. https://www.youtube.com/@OakHarvestStockTalk. Alternatively, you can type “Stock Talk with Chris” in the You Tube search box, and you should be directed to the new content. The investment content will be a “sub-channel” under our current OHFG channel. Please subscribe if you are interested.
Previously Released YouTube video in 4q22 on the Federal Reserves Balance Sheet and Commercial Banking losses: Federal Reserve Balance Sheet, Commercial Banking, and my Nightmares. https://www.youtube.com/watch?v=4EVGMniJQDk&list=PLxj0FBH5Bt8twiZx9RvxpW9AydohZ5W3-&index=32&t=355s
SIPC Insurance Coverage Explained: https://www.sipc.org/for-investors/what-sipc-protects
FDIC Insurance Coverage Explained: https://www.fdic.gov/resources/deposit-insurance/
Charles Schwab Excess SIPC Account Protection Insurance: https://international.schwab.com/account-protection#:~:text=Protected%20up%20to%20US%24600,which%20may%20be%20in%20cash.
TD Ameritrade Excess SIPC Account Protection Insurance: https://www.tdameritrade.com/account-protection.html
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