What you need to know this week

Two key economic data points ahead of the Federal Reserve’s next policy meeting will greet investors this coming week, as investors’ eyes – and beyond – will remain locked on the latest developments in the fallout from last week’s Silicon Valley Bank collapse.

The February Consumer Price Index (CPI) on Tuesday and February retail sales reading on Wednesday morning are likely to bolster investor expectations for the Fed’s next policy move.

Consensus forecasts call for CPI to rise 6% from last year on a headline basis and 5.5% on a “core” basis in February, according to data from Trading Economics. A 6% rise in inflation would mark the slowest annual rise in consumer prices since September 2021.

However, investor focus on the Fed’s next move has taken over as the top focus for investors in recent days with Friday’s shock collapse of Silicon Valley Bank and fears of what the second-biggest bank failure in US history could mean for the broader financial system.

How futures open on Sunday night and what follow-up, if any, is in Monday’s trading session will be crucial in setting the tone for the week ahead. And it will provide a clue as to whether investors agree with many initial reactions to the collapse of Silicon Valley Bank — that this represents a unique failure rather than the beginning of something bigger.

As Yahoo Finance’s Jennifer Schonberger reported Friday, TD Cowen analyst Jaret Seiberg wrote Friday that the firm “does not see this as the start of a broader threat to the safety and soundness of the banking system.”

“Like Silvergate (SI), Silicon Valley had a unique business model that relied less on retail deposits than a traditional bank,” Seiberg added. “This left the bank more exposed to interest rate risk as its funding became more expensive, but its assets were not priced higher.”

A view of the Park Avenue location of Silicon Valley Bank (SVB), in New York City, U.S., March 10, 2023. REUTERS/David ‘Dee’ Delgado

In a note to clients published Friday, Kabir Caprihan, an analyst at JPMorgan, echoed much of that sentiment, writing: “Initially, we don’t think (Silicon Valley Bank’s collapse) is systemic, but it reflects some of the structural issues that we highlighted in our outlook and what drove our underweight on regional banks.”

The scale and particular challenges that brought down Silicon Valley Bank are unique — its exposure to the money-burning tech world, which was the hardest hit by investors during the Fed’s rate-hiking campaign, is at the top of this list. But the overall story of a rise in deposits in 2021, outflows in recent months and losses in securities portfolios is likely to challenge some regional banks in the near term.

A Bloomberg report said late Saturday that the FDIC — which took control of the bank Friday morning — was working to make a whole lot of uninsured deposits at the bank, with the outlet reporting that payments between 30% and 50% of deposits were being discussed .

Fed and FDIC officials have also discussed creating a fund to freeze deposits from other institutions that could face a crisis similar to the one that shut down Silicon Valley Bank in the coming weeks, Bloomberg reported. Across the Atlantic, British Chancellor of the Exchequer Jeremy Hunt said the UK government has been working to ensure that any UK firm’s cash needs from SVB’s failure “are able to meet their cash flow requirements to pay their staff.”

Semafor reported over the weekend that hedge funds have reached out to startups with cash tied up in Silicon Valley Bank with offers to buy their deposits at a discount as some companies face a cash crunch with payroll and a potentially long road to being made entirely on money deposited in the distressed bank.

This comes as regulators vet buyers for Silicon Valley Bank as well as the wealth management, investment and securities business of the bank’s former parent, SVB Financial ( SIVB ). Employees at the failed Silicon Valley Bank will remain on the job for 45 days before being let go, Bloomberg reported Saturday.

The FDIC’s latest update on the situation as of Saturday evening said: “All depositors will have full access to their insured deposits by Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week.”

The FDIC added: “Uninsured depositors will receive a foreclosure certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”

“The circumstances of the Silicon Valley Bank collapse are unique enough that it is unlikely to trigger widespread financial contagion,” wrote Paul Ashworth, chief North American economist at Capital Economics. “Still, it’s a timely reminder that when the Fed is singularly focused on pushing inflation by raising interest rates – it often ends up screwing things up.”

Financial calendar

Monday: No major financial releases planned.

Tuesday: Consumer Price Index, year-on-year, February (+6% expected vs. +6.4% in January); Consumer Price Index, month-on-month, February (+0.4% expected vs. +0.5% in January); “Core” CPI, year-on-year, February (+5.5% expected vs. 5.6% in January); “Core” CPI, month-over-month, February (+0.4% expected vs. +0.4% in January)

Wednesday: MBA mortgage applications; Producer prices, year-on-year, February (+5.4% expected vs. 6% in January); Producer prices, month-over-month, February (+0.3% expected vs. +0.7% in January); “Core” PPI, y-o-y, February (+5.2% expected vs. +5.4% in January); “Core” PPI, month-on-month, February (+0.4% expected vs. 0.4% in January); Retail sales, month-over-month, February (-0.3% expected vs. +3% in January); NAHB Home Builder Sentiment, March (42 expected vs. 42 in February)

Thursday: Building permits, February (1.238 million annual rate against 1.339 million in January); Housing starts, February (1.31 million annual rate vs. 1.309 million in January); Initial jobless claims (205,000 expected vs. 211,000 last week); Philly Fed Production Survey

Friday: Industrial production, February (+0.4% expected vs. 0% in January); University of Michigan consumer sentiment March preliminary reading

Earnings calendar

Monday: GitLab (GTLB)

Tuesday: Lennar (LEN); Guess (GES); SentinelOne (S); StoneCo (STNE)

Wednesday: Adobe (ADBE); Oatly (OTLY); UiPath ( PATH ); Five Under (FIVE)

Thursday: FedEx (FDX); Dollar General (DG); G-III clothing (GIII); Jabil (JBL); Signet Jewelers (SIG); Academy Sports (ASO); Williams-Sonoma (WSM); Traeger (KOG)

Friday: No notable earnings indicated for release.

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