Market Recap - S&P 500 BREAKS OUT OF SIX WEEK TRADING RANGE

The Major Indices All Logged Gains This Week, Which Ends A Six Week Stupor For The S&P 500 Where It Neither Gained Nor Declined More Than 1.0%.

The S&P 500 also hit a new closing high for the year on Thursday (4,199) and a new intraday high for the year on Friday (4,212). The index was unable, however, to maintain a posture above 4,200 on a closing basis, which has been an area of stern resistance since August 2022. 

The continued outperformance of the mega cap stocks helped to support index performance, yet more stocks under the surface participated in this week's gains compared to recent weeks.

Market participants were contending with mixed directions signals throughout the week. Optimism about a debt ceiling deal began to emerge after President Biden met with congressional leaders on Tuesday. Commentary from congressional leaders fueled hope that the parties were more aligned with debt ceiling negotiations. That optimism continued to build until Friday when Punchbowl News reporter Jake Sherman tweeted that "debt limit talks between the White House and House Republicans have been paused, per multiple sources involved in the talks."

Some hawkish sounding Fed commentary was also in play this week. Specifically, Dallas Fed President Logan (FOMC voter) said that current data doesn't yet support the Fed pausing in June. St. Louis Fed President Bullard (not an FOMC voter) acknowledged the need to raise rates further since inflation remains persistently high. Although Mr. Bullard does not vote on the 2023 FOMC, his view nonetheless reinforces the notion that Fed officials are not talking rate cuts this year.

Treasuries saw some unwinding of the safety premium this week, especially at the short end of the curve, as participants contemplated the possibility of the Fed raising rates again at the June FOMC meeting. The 2-yr note yield rose 29 basis points this week to 4.27% and the 10-yr note yield rose 23 basis points to 3.69%. 

The bond market was also reacting to the optimism early in the week about debt ceiling talks along with some pleasing price action in regional bank stocks. The SPDR S&P Regional Banking ETF rose 7.8% after Western Alliance (WAL) said its deposits have increased by more than $2 billion since the end of the first quarter. WAL rose 24.9% this week on the news. 

Earnings season is winding down, but this week was punctuated by earnings reports from some key retailers. Dow components Home Depot (HD) and Walmart (WMT) received mixed reactions with HD losing some ground and WMT moving higher after they reported earnings. Target also moved higher on its earnings report while Foot Locker plunged 27% on Friday after reporting disappointing earnings results and issuing dismal guidance.

Most of the S&P 500 sectors logged gains this week led by information technology (+4.2%), consumer discretionary (+2.6%), communication services (+3.1%), and financials (+2.2%). Meanwhile, the utilities (-4.4%) sector saw the biggest decline by a decent margin followed by real estate (-2.4%). 

• Nasdaq Composite: +3.0% for the week / +20.9% YTD

• S&P 500: +1.7% for the week / +9.2% YTD

• Russell 2000: +1.9% for the week / +1.1% YTD

• Dow Jones Industrial Average: +0.4% for the week / +0.8% YTD

• S&P Midcap 400: +1.0% for the week / +0.7% YTD

Market Recap - Mega caps hold up broader market

Mega caps hold up broader market

Nasdaq Composite closed the week with a slim gain while the S&P 500 closed with a slim loss.

The 4,100 level was an important area of relative support for the S&P 500 this week. Index level price action was somewhat misleading, though, with more selling occurring under the surface. Mega cap stocks, benefitting from some flight to safety buying, held up the broader market.

The Invesco S&P 500 Equal Weight ETF fell 1.1% this week while the Vanguard Mega Cap Growth ETF rose 0.8%.  Alphabet offered a lot of support, rising 11.0% this week following its Developers Conference on Wednesday. 

Market participants were digesting the April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) on Monday. In brief, the SLOOS confirmed what the market had already been expecting following the regional banking crisis that began in mid-March. Lending standards have tightened and banks expect to tighten standards across all loan categories over the remainder of 2023. There was knee-jerk volatility in the immediate aftermath, yet the major indices closed little changed from levels seen before the release of the SLOOS. 

PacWest (PACW) was a losing standout from the bank stocks, falling another 21.0% this week after announcing that its deposits declined approximately 9.5% for the week ending May 5. PACW also cut its dividend to $0.01 per share from $0.25.

Angst about the debt ceiling weighed over the broader market after Treasury Secretary Yellen warned last weekend of "economic chaos" if the debt ceiling is not raised. President Biden met with congressional leaders on Tuesday to discuss the debt ceiling, yet that did not quell the market's worries. Reports suggested that the meeting showed no signs that they had moved closer to a deal. President Biden was supposed to meet with congressional leaders again on Friday, but that meeting was postponed until early next week as staff members continue to negotiate.  

Meanwhile, market participants were reacting to the latest inflation readings in the form of the April Consumer and Producer Price Indices. Those reports largely went the market's way, which is to say that the continued month-over-month moderation in inflation should at least spur the Fed to entertain keeping its policy rate on hold when it meets again in June.

Economic releases culminated Friday with the release of the preliminary University of Michigan Consumer Sentiment Survey for May, which featured a drop in sentiment and an increase in five-year ahead inflation expectations to 3.2% from 3.0%. That is the highest reading since 2011. Notably, the NY Fed's Survey of Consumer Expectations for April also reflected a slight increase in three-year and five-year ahead inflation expectations. 

Separately, Disney was a drag on sentiment on Thursday after reporting fiscal Q2 results that featured a 2% year-over-year decline in Disney+ paid subscribers.

Growth concerns manifested themselves in S&P 500 sector performance. Energy (-2.2%), materials (-2.0%), and industrials (-1.2%) showing some of the steepest declines. Unsurprisingly, the financials sector was another top laggard, down 1.4%.

The communication services (+4.3%) and consumer discretionary (+0.6%) sectors were the lone outperformers to log a gain, boosted by their respective mega cap components. 

The 2-yr Treasury note yield rose seven basis points to 3.98% this week and the 10-yr note yield rose one basis point to 3.46%. The U.S. Dollar Index rose 1.4% to 102.71.

• Nasdaq Composite: +0.4% for the week / +17.4% YTD

• S&P 500: -0.3% for the week / +7.4% YTD

• Dow Jones Industrial Average: -1.1% for the week / +0.5% YTD

• S&P Midcap 400: -1.2% for the week / +0.1% YTD

• Russell 2000: -1.1% for the week / -1.2% YTD

Market Recap - Rate hikes and regional banks take center stage

The stock market closed out the first week of May on an upbeat note, but Friday's positive price action was not enough to recoup this week's losses for most of the major indices.

The S&P 500 breached its February high closing level (4,179) this week, hitting 4,186 at its high on Monday, before slipping below the 4,050 level on Thursday.  

There was no shortage of market-moving events this week that included a barrage of earnings reports, the FOMC rate hike on Wednesday, the ECB rate hike and Apple's earnings report on Thursday, and the April Employment Report on Friday. In addition, there was a surprise announcement on Tuesday from Treasury Secretary Yellen that extraordinary measures to pay the nation's bills could be exhausted as early as June 1. Following that disclosure, it was announced that President Biden will meet with House Speaker McCarthy and other Congressional leaders on May 9 to discuss the debt ceiling.

Overarching themes that drove the price action were growth concerns, ongoing fallout in regional bank stocks, debt ceiling worries, and uncertainty about central banks overtightening and forcing a sharper economic slowdown; however, Friday's trade was dictated by the upbeat response to Apple's earnings report, the April Employment Report, and a needed rebound in the regional bank stocks.

Market participants learned last weekend that First Republic Bank (FRC) was seized by regulators. Subsequently, the FDIC facilitated a deal whereby JPMorgan Chase acquired a substantial majority of assets and assumed the deposits and certain liabilities of FRC. Then on Thursday, PacWest confirmed it's considering strategic options. Concerns continued to mount after the FT reported that Western Alliance is also considering strategic alternatives, including a possible sale, yet Western Alliance disputed the report, calling it "categorically false in all respects."

PacWest and Western Alliance fell sharply this week, registering losses of 43.3% and 26.8%, respectively, despite outsized gains on Friday due to short-covering activity.

Worries about central banks overtightening and forcing a sharper economic slowdown came into focus on Wednesday after the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 5.00-5.25%, which was largely expected. The main indices declined that day, however, on the nagging view that the Fed is not inclined to cut interest rates soon despite a contrary view that has been priced into the fed funds futures market.

Some of Fed Chair Powell's remarks in his press conference that participants were presumably reacting to included his acknowledgement that the process of getting inflation back down to 2.0% has a long way to go. He added that if the Fed's inflation forecast is broadly right, it would not be appropriate to cut rates.

The Hong Kong Monetary Authority, the Norges Bank, and the ECB all followed the FOMC rate hike by raising their key lending rates by 25 basis points.

By Friday, though, some concerns about overtightening and central banks forcing a hard landing for the economy started to dissipate. The shift in sentiment was in response to the April Employment Report, which was good enough to engender some thoughts that a soft landing for the economy may still be possible despite the Fed's aggressive rate hikes.

Apple drove a lot of the index level gains on Friday following its pleasing earnings report and capital return plan.

Only three of the 11 S&P 500 sectors closed with gains this week unsurprisingly led by the information technology sector (+0.6%), benefitting from the move in Apple. The defensive-oriented health care (+0.1%) and utilities (+0.1%) sectors also outperformed. The energy sector (-5.8%) saw the biggest decline by a wide margin followed by financials (-2.7%) and communication services (-2.3%). 

In other stock specific news, there was a successful IPO on Thursday with Johnson & Johnson's consumer health spinoff Kenvue going public.

Treasuries settled the week with gains in most tenors. The 2-yr note yield fell 15 basis points to 3.91% while the 10-yr note yield was unchanged at 3.45%. The U.S. Dollar Index fell 0.4% to 101.24.

• Nasdaq Composite: +0.7% for the week / +16.9% YTD

• S&P 500: -0.8% for the week / +7.7% YTD

• Dow Jones Industrial Average: -1.2% for the week / +1.6% YTD

• S&P Midcap 400: -1.2% for the week / +1.3% YTD

• Russell 2000: -0.5% for the week / -0.1% YTD

Market Recap - Huge batch of earnings brings mixed price action

The S&P 500, Dow Jones Industrial Average, and Nasdaq all closed the last week of April with gains while the Russell 2000 logged a sizable decline.

Investors received a huge slate of earnings news and economic data this week, which all reflected mixed activity. Those mixed results fueled a midweek sell-off before a strong rally effort during the last two sessions saw the market pick itself back up. 

Earnings results from many mega cap stocks pulled a lot of focus this week. Namely, Alphabet, Microsoft, Meta Platforms, and Amazon.com all reported quarterly results. Unsurprisingly, their reports received mixed reactions from investors.

Alphabet and Amazon declined on their earnings reports, with the latter warning about slowing cloud services growth, while Microsoft and Meta Platforms rose sharply. Nonetheless, mega cap stocks a class made an outsized contribution to index level gains. The US Mega Cap Growth Index rose 1.9% on the week. 

The continued outperformance of the mega caps helped foster a sense of relief that those names are still performing relatively well from an operational standpoint and maintaining their position as market leaders.

On the flip side, some earnings reports piled onto investors' lingering growth concerns. Most notably, UPS, Dow component Dow Inc., Texas Instruments, and Norfolk Southern all disappointed with their earnings and/or guidance. 

Ongoing fallout at First Republic Bank following its disappointing earnings report, which featured a 40% decline in deposits, renewed lingering worries about banks facing higher deposit costs and tighter lending standards, potentially impeding on economic growth prospects. Notably, the market bounced back quickly from a sharp decline after CNBC reported that FRC is likely headed to receivership, indicating that issues at FRC are not viewed as systemic.

Economic data this week showed signs of weakness, yet there was no clear signal that the economy is deteriorating rapidly. The advance Q1 GDP report didn't look great on the surface with real GDP increasing at an annualized rate of 1.1% (Briefing.com consensus 2.0%) after increasing 2.6% in the fourth quarter. However, personal consumption expenditure growth accelerated in the first quarter to 3.7% from 1.0% in the fourth quarter. 

The March Durable Orders report contributed to slowdown concerns due to a 0.4% decline in nondefense capital goods orders in March -- a proxy for business spending. Separately, the labor market remains strong as evidenced by the initial jobless claims remaining a long way from the levels that have been seen in past recessions since 1980.

The S&P 500 communication services sector (+3.8%) was the top gainer this week by a big margin, followed by information technology (+2.4%) and real estate (+1.5%). The utilities (-1.0%) and industrials (-0.6%) sectors logged the biggest declines. 

Treasuries logged gains across the curve this week. The 2-yr note yield fell 10 basis points to 4.06% and the 10-yr note yield fell 12 basis points to 3.45%. The U.S. Dollar Index closed the week flattish at 101.68. 

·   Nasdaq Composite: +1.3% for the week / +16.8% YTD

·   S&P 500: +0.9% for the week / +8.6% YTD

·   Dow Jones Industrial Average: +0.9% for the week / +2.9% YTD

·   S&P Midcap 400: -0.3% for the week / +2.5% YTD

·   Russell 2000: -1.3% for the week / +0.4% YTD

Market Recap - Lackluster Action in Front of Big Week of Earning

The Stock Market Didn't Experience Much Up Or Down Price Action This Week. The S&P 500 Closed At 4,137 Last Friday, Then Closed At 4,133 This Friday.

There was not much volatility in daily price action as well with the major indices languishing along, moving mostly sideways.

Investors were playing a waiting game ahead of a big batch of earnings results next week that will feature reports from some mega cap stocks, including Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOG), and Meta Platforms (META). These reports will follow disappointing Q1 results from Tesla (TSLA), which plunged nearly 10.0% on Thursday.

Meanwhile, Dow component Procter & Gamble (PG) rose 3.5% on Friday as investors digested its pleasing fiscal Q3 results and affirmation of its FY23 EPS outlook.

Bank stocks were a pocket of weakness this week following earnings reports from some regional banks, including Zions Bancorporation (ZION), Truist Financial (TFC), and Western Alliance Bancorp (WAL). Despite regional bank weakness, the S&P 500 financial sector was among the top performers with a 1.0% gain.

Other top performing sectors include real estate (+1.6%), consumer staples (+1.7%), and utilities (+1.1%). The communication services (‐3.1%) and energy (‐2.5%) sectors were the worst performers by a wide margin.

Market participants were also reacting to a slate of weak economic data, which contributed to the hesitant mindset due to a sense that slower growth will put pressure on future earnings. Data releases this week featured the highest continuing jobless claims level since November 27, 2021, the weakest reading for the Philadelphia Fed Index (‐31.3) since May 2020, the weakest level for the U.S. Leading Economic Index since November 2020, and a 22% year‐over‐year decline in existing home sales in March.

The market continues to contend with the notion that the Fed will keep rates higher for longer. Philadelphia Fed President Harker (FOMC voter) said the Fed is going to need to do more to get inflation back down to target, according to Reuters. This followed New York Fed President Williams (FOMC voter) signaling support for another rate hike at the May FOMC meeting and Cleveland Fed President Mester's remarks, according to CNBC, that policy needs to move somewhat further into tightening territory with the fed funds rate above 5.00%.

Earlier in the week, St. Louis Fed President Bullard (not an FOMC voter) acknowledged the need to raise rates further since inflation remains persistently high and Atlanta Fed President Bostic (not an FOMC voter) said in a CNBC interview that he thinks the Fed should hike rates one more time and hold rates there "for quite some time."

This commentary from Fed officials contrasts the fed funds futures market, which is pricing in two rate cuts before the end of the year, according to the CME FedWatch Tool.

Oil prices declined this week, reflecting slowdown concerns. WTI crude oil futures fell 5.5% to $77.86/bbl. Natural gas futures rose 5.0% to $2.22/mmbtu.

The 2‐yr Treasury note yield rose six basis points this week to 4.16% and the 10‐yr note yield rose five basis points to 3.57%.

• Nasdaq Composite: ‐0.4% for the week / +15.3% YTD

• S&P 500: ‐0.1% for the week / +7.7% YTD

• S&P Midcap 400: +0.4% for the week / +2.8% YTD

• Dow Jones Industrial Average: +1.2% for the week / +2.3% YTD

• Russell 2000: +0.6% for the week / +1.7% YTD

Market Recap - INFLATION AND FED POLICY CONCERNS OFFSET BANK STOCK STRENGTH

The Stock Market Had A Mixed Showing This Week. The Major Indices All Registered Gains Compared To Last Week's Closing Levels, But Concerns About Inflation And Fed Policy Kept A Limit On Index Performance.

There was not a lot of big moves early in the week as investors awaited market-moving economic data followed by Q1 earnings reports from several large banks on Friday. Coinbase Global (COIN) was an exception in that regard, gaining 6.0% on Tuesday after Bitcoin breached $30,000. 

Inflation concerns rose to the fore after investors received the Consumer Price Index (CPI) for March. Total CPI fell on a year-over-year basis, which was a welcome development, but core-CPI accelerated on a year-over-year basis. The total Producer Price Index (PPI) and core-PPI declined in March, but the uptick in core-CPI offset some excitement about PPI disinflation. 

In addition, comments from Fed officials this week indicated that the latest inflation readings are not likely to convince the Fed to pause its tightening efforts just yet. Fed Governor Waller (FOMC voter) said in a speech before the open on Friday that the Fed hasn't made much progress on its inflation goal and that he thinks monetary policy needs to be tightened further and remain tight for a substantial period of time. Chicago Fed President Goolsbee (FOMC voter) did, however, indicate that he thinks the Fed needs to be cautious, given the uncertainty about where financial headwinds are going. 

The data and commentary this week did not change the market's view that much in regards to the Fed's May FOMC meeting. According to the CME FedWatch Tool, the fed funds futures market is pricing in a 77.5% probability of a 25 basis points rate hike in May, up from 71.2% a week ago. The disinflation seen in economic data this week was not enough to offset the core-CPI acceleration and negative sentiment driven by Fed official commentary. 

Market participants had been anxiously awaiting the start of Q1 earnings season on Friday. JPMorgan Chase, Citigroup, BlackRock, and PNC Financials all finished Friday's session with a gain after pleasing investors with Q1 results. 

Strength from the financial sector was not enough to carry the market on Friday, though, as policy expectations and rate hike concerns drove price action. A few widely held stocks also sold off and contributed to Friday's weakness. Namely, Boeing (BA) declined on reports that it expects production and delivery delays for its 737 MAX due to parts problems and UNH sold off on investors' concerns about meeting short and long-term EPS targets in the face of Medicare Advantage changes.

In addition, regional banks were weak on Friday despite gains in their larger peers. 

Still, the S&P 500 hit its best level since mid-February this week (4,150), reaching the upper bound of an 11-month trading range. Trading this week occurred on noticeably light volume, which could be attributed to larger wait-and-see mindset as investors await the bulk of Q1 earnings season. Participants will be keenly focused on guidance and whether earnings estimates are marked down enough or if they need to come down further.

Only four S&P 500 sectors closed with a loss this week -- real estate (-1.5%), utilities (-1.3%), information technology (-0.4%), and consumer staples (-0.3%) -- while financials (+2.9%) led the outperformers by a decent margin. 

The 2-yr Treasury note yield rose 14 basis points this week to 4.10% and the 10-yr note yield rose 12 basis points to 3.52%. The U.S. Dollar Index rose 0.5% to 101.56. 

Energy complex futures rose this week. WTI crude oil futures were up 2.5% to $82.55/bbl and natural gas futures rose 4.7% to $2.13/mmbtu. 

• Nasdaq Composite: +0.3% for the week / +15.8% YTD

• S&P 500: +0.8% for the week / +7.8% YTD

• S&P Midcap 400: +1.7% for the week / +2.4% YTD

• Dow Jones Industrial Average: +1.2% for the week / +2.3% YTD

• Russell 2000: +1.5% for the week / +1.1% YTD

Market Recap - Weak data fuels cyclical sector sell-off

The stock market mostly declined on the week.

The Dow Jones Industrial Average squeezed out a slim gain, thanks to money flowing into blue chip names, while the other major indices registered losses due to renewed growth concerns.

There was not a ton of conviction to start the week after OPEC+ surprised markets with a 1.16 million barrels per day production cut announcement, which will start in May and continue through the end of the year. This sent oil prices on a tear, rising 6.4% this week to $80.70/bbl. 

After the market digested the surprise move by OPEC+, growth concerns rose to the forefront and influenced price action for the remainder of the week. Lingering slowdown concerns were stoked by a slate of weak economic data and a contention by JPMorgan Chase CEO Jamie Dimon in his annual shareholder letter that the regional banking crisis is not over yet and will have repercussions for years to come.

Many of the economic releases this week came in weaker than expected. Some of the more influential data included the March ISM Manufacturing and Non-Manufacturing Indices, February JOLTS Job Openings and Factory Orders, March ADP Employment Change, and weekly jobless claims. The latter of which featured big upward revisions to last week's numbers. 

The sticking point for stock market participants is a sense that slower growth will translate to further cuts to earnings estimates. Cyclical sectors were the biggest losers this week while defensive-oriented sectors enjoyed nice gains. 

The industrials (-3.4%), consumer discretionary (-3.0%), and materials (-1.3%) sectors were the top laggards while the utilities (+3.1%) and health care (+3.1%) sectors rose to the top of the leaderboard. The energy sector (+3.0%) was another top performer this week despite its economically-sensitive status thanks to the OPEC+ announcement. 

The Treasury market remains open Friday until 12:00 ET, so Thursday's settlement levels are not comparable for weekly yield changes.

·   Nasdaq Composite: -1.1% for the week / +15.5% YTD

·   S&P 500: -0.1% for the week / +6.9% YTD

·   S&P Midcap 400: -2.6% for the week / +0.7% YTD

·   Dow Jones Industrial Average: +0.6% for the week / +1.0% YTD

·   Russell 2000: -2.7% for the week / -0.4% YTD

Market Recap - Positive week to finish out positive quarter

It Was A Strong Week, And First Quarter, For The Stock Market.

The S&P 500 spent most of the week above its 50-day moving average and climbed past the 4,100 level by Friday's close. The major indices stuck to a decidedly narrow range in the first half of the week, though, as investors weighed the latest developments in the recent banking sector fallout, which included a two-day Congressional hearing on the SIVB bank failure. 

Participants reacted favorably to news that First Citizens Bancshares will acquire some of Silicon Valley Bank's assets along with a Bloomberg report indicating that authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet. Bank stocks remained under pressure, though, after FDIC Chairman Michael Barr told the Senate Banking Committee that he anticipates having to increase capital and liquidity standards for firms over $100 billion, adding that more regulation is needed.

Still, price action indicated that worries about the health of the banking sector had dissipated somewhat. The S&P 500 financial sector rose 3.7% this week, but it declined 6.1% in Q1. 

Some of the gains this week were driven by relatively strong leadership from semiconductor stocks. The PHLX Semiconductor Index rose 3.5% this week and surged 27.6% this quarter. Investors initially reacted favorably to Micron's earnings report, but sold shares on Friday due to reports that Chinese regulators are conducting a cybersecurity review of MU products.

The rally really picked up steam on Friday after investors received relatively pleasing inflation data. Briefly, the PCE Price Index slowed to 5.0% yr/yr in February from 5.3% in January while the core-PCE Price Index, the Fed's preferred inflation gauge, dipped to 4.6% from 4.7%. The direction of these moves is a welcomed development, but the pace at which these indices are decelerating leaves a bit to be desired.

All 11 S&P 500 sectors logged gains this week. Energy (+6.2%), consumer discretionary (+5.6%), and real estate (+5.2%) were the top performer while communication services (+1.5%) and health care (+1.8%) showed the slimmest gains. 

The 2-yr Treasury note yield rose 29 basis points this week to 4.06% and the 10-yr note yield rose 11 basis points to 3.49%. 

The U.S. Dollar Index fell 0.6% to 102.52. On a currency related note, China and Brazil agreed to trade in their own currencies instead of the U.S. dollar.

• Nasdaq Composite: +3.4% for the week / +16.8% YTD

• S&P 500: +3.5% for the week / +7.0% YTD

• S&P Midcap 400: +4.5% for the week / +2.3% YTD

• Russell 2000: +3.9% for the week / +3.4% YTD

• Dow Jones Industrial Average: +3.2% for the week / +0.4% YTD

Market Recap - Banking worries and Fed policy decision induces volatility

This week started, and then ended, on a pretty firm note for the stock market.

In between, however, there was a bit of volatility as investors weighed ongoing concerns about the bank industry along with the latest policy move from the Fed.

Over the weekend, market participants learned that the Swiss National Bank brokered a UBS (UBS) acquisition of Credit Suisse (CS) for a "takeunder" price of $3.2 billion. The Federal Reserve also announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that "the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient."

Also, a Bloomberg report early in the week indicated the Treasury Department is looking at ways to guarantee all bank deposits, if necessary, without congressional approval. This was followed by Treasury Secretary Yellen's remark in prepared comments for the American Bankers Association that the government is prepared to intervene again "if smaller institutions suffer deposit runs that pose the risk of contagion."

Many of the recent embattled bank stocks reacted favorably and moved higher in the first half of the week as investors anxiously awaited the FOMC decision on Wednesday, which brought sharp declines at the index level that day.

Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00% and the updated Summary of Economic Projections showed the Fed's median terminal rate of 5.10% unchanged from December. Stocks initially rallied on this news before taking a sharp turn lower as Fed Chair Powell gave his press conference.

The sell off was hastened by Fed Chair Powell's acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.

All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.

More central banks followed suit later in the week. The Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and Philippines also hiked their policy rates.

By the end of Friday's session, price action suggested that the market had shaken off some of the worries that drove downside moves this week. The main indices closed the session higher despite sharp declines in Europe's major indices on the news that Deutsche Bank's (DB) cost of default insurance jumped to a four-year high.

The Treasury market also exhibited volatility this week. Ultimately, the 2-yr note yield fell five basis points this week to 3.77% and the 10-yr note yield fell two basis points to 3.38%.

Only two S&P 500 sectors finished the week with declines -- real estate (-1.4%) and utilities (-1.2%) -- while the communication services (+3.4%), energy (+2.3%), and information technology (+2.0%) sectors saw the biggest gains.

·   Nasdaq Composite: +1.7% for the week / +13.0% YTD

·   S&P 500: +1.4% for the week / +3.4% YTD

·   S&P Midcap 400: +1.3% for the week / -1.1% YTD

·   Russell 2000: +0.5% for the week / -1.5% YTD

·   Dow Jones Industrial Average: +1.2% for the week / -2.7% YTD

Market Recap - BANKING WORRIES DRIVE MIXED PRICE ACTION

Banking Worries That Began To Surface Late Last Week Continued To Plague Investors Throughout This Week.

Market participants learned Sunday through a joint statement from the Federal Reserve, Treasury, and FDIC that all depositors at Silicon Valley Bank and Signature Bank of New York would be fully protected even though both banks had been taken over by regulators. In turn, the Fed also introduced a Bank Term Funding Program (BTFP) that will help banks avert selling Treasury and other government securities at a loss by allowing them to offer those securities to the Fed, which will value them at par, as collateral.

Those actions were designed to shore up confidence in the banking industry, but price action in the bank stocks this week suggested confidence has still not been restored.

First Republic Bank (FRC) was at the epicenter of the bank stock trade, having been the beneficiary of news that 11 large banks, including JPMorgan Chase (JPM), will collectively make $30 billion of uninsured deposits into the bank. That news on Thursday triggered a massive reversal in shares of FRC to the upside, but by Friday, FRC was seeing large losses again after announcing the suspension of its common share dividend and that its borrowing from the Federal Reserve from March 10-15 varied from $20 billion to $109 billion. 

The latter news coupled with the report that banks borrowed $11.9 billion from the newly announced Bank Term Funding Program and approximately $153 billion from the Fed's discount window for the week ending March 15 once again rattled investors and led to widespread selling of the bank stocks to end the week. 

With investors lacking confidence in the banking industry, a risk-off mentality drove price action for most of the week. Buyers piled into mega cap stocks that are viewed as being distant from the banking sector fallout, having strong balance sheets and being more resilient in an economic slowdown. Alphabet, NVIDIA, and Microsoft all gained more than 12.0% this week. 

The Mega Cap Growth Index jumped 5.7% this week, helping to prop up returns at the index level for an otherwise weak market. To wit, the S&P 500 Equal Weight Index declined 1.7% this week while the market-cap weighted S&P 500 ended the week up 1.4%.

The influence of the mega cap stocks was evident in the outperformance of the communication services (+6.9%), information technology (+5.7%), and consumer discretionary (+2.4%) sectors, all of which house mega cap constituents. That outperformance was more of a safety trade that also manifested itself in the outperformance of the defensive-oriented utilities (+3.9%), consumer staples (+1.3%), and health care (+1.3%) sectors.

Similarly, price action in the Treasury market also reflected a flight to safety in conjunction with concerns the economy may weaken considerably because of the banking sector's problems. On a related note, oil prices dropped 13.5% this week to $66.33/bbl on demand concerns.

The 2-yr note yield plunged 77 basis points this week to 3.82% and the 10-yr note yield fell 30 basis points to 3.40%, also driven in part by a belief that the Fed isn't going to be able to raise rates as much as previously thought and may be forced to cut rates relatively soon.

The latter point notwithstanding, the CME FedWatch Tool shows a 64.2% probability that the Fed will raise rates by 25 basis points at the March 21-22 FOMC meeting. That is up from 59.8% a week ago. Notably, the European Central Bank agreed this week to raise its key policy rates by 50 basis points despite worries surrounding Credit Suisse, saying it did so because "inflation is projected to remain too high for too long."

·   Nasdaq Composite: +4.4% for the week / +11.1% YTD

·   Russell 2000: -2.6% for the week / -2.0% YTD

·   S&P Midcap 400: -3.2% for the week / -2.3% YTD

·   S&P 500: +1.4% for the week / +2.0% YTD

·   Dow Jones Industrial Average: -0.2% for the week / -3.9% YTD