Two things will capture all the market’s attention in the coming week: the Federal Reserve’s meeting in March and the government’s ongoing attempts to calm concerns about the banking system. The market is currently pricing in a slightly higher likelihood of the Fed raising rates by 25 basis points on Wednesday versus keeping them unchanged (about a 60/40 split at Friday’s close). But with inflation cooling, there is an argument to be made for a “hawkish pause” to raise interest rates. This would buy the FOMC some time to digest the breakdown of the SVB’s impact on the banking sector and collect more inflation data when the core PCE price index for February – the Fed’s preferred measure of inflation – comes out on March 31. SVB officially filed for bankruptcy on Friday. . As a result of SVB’s meltdown, banks are increasing their deposit rates to better compete with government bonds, which have proven to be a better alternative to keeping cash in savings and checking accounts. They have also started to tighten the loan requirements. These two moves should at least do some of the Fed’s tightening work for it. As discussed on Friday, the government needs to figure out how to re-instill confidence in the US banking system and reassure depositors that their money is safe without causing any or at least minimizing the risk of moral hazard. Rate hike or no rate hike, we’ll be closely following Fed Chair Jerome Powell’s post-announcement press conference for clues on future policy. The Fed chairman has to balance the committee’s interest rate decision with the counterweight of his commentary. Put another way, we’re looking for a “hawkish break” or—given the probabilities indicated by the CME FedWatch Tool for a hike—a “dove hike.” A strong argument for the latter (dove hike) is that it would show the market that the Fed does not see the SVB event as indicative of a broader problem. At the same time, it will also make it clear that the central bank will continue with increased caution. If it raises, Powell should speak softly; no increase and Powell should forcefully remind the market that the job is not done. What we don’t want to see is a “dove break” or a “hawkish rise”. The former will raise concerns that Powell has taken his eye off the ball, while the latter could raise fears that Powell is on his way to walking us into a hard landing recession. No portfolio companies will report next week. Here are some other earnings reports and financials to watch this coming week: Monday, March 20 Before the bell: DouYu (DOYU), Foot Locker (FL), Pinduoduo (PDD), Niu Tech (NIU) After the bell: ProFrac (ACDC ) Tuesday, March 21 Before the clock: Canadian Solar (CSIQ), Tencent Music (TME), HUYA (HUYA) After the clock: GameStop (GME), Nike (NKE), Array Tech (ARRY), AAR Corp ( LUFT) 10 :00 ET: Existing Home Sales Wednesday, March 22 Before the Bell: Petco Health ( WOOF ), Winnebago ( WGO ), Shoe Carnival ( SCVL ), Ollie’s Bargain ( OLLI ), iMedia Brands ( IMBI ), Baozun ( BZUN ) After the Bell: Chewy ( CHWY ), KB Home ( KBH ), Worthington Industries ( WOR ), Steelcase ( SCS ), MillerKnoll ( MLKN ) 2:00 PM ET: FOMC meeting Thursday, March 23 Before the bell: Accenture ( ACN ), BRP ( DOOO ), Commercial Metals ( CMC ), Darden Restaurants ( DRI ), FacSet ( FDS ), General Mills ( GIS ), Movado Group ( MOV ) After the Clock: Vasta Platform Limited ( VSTA ), Quest Resource ( QRHC ) 8:30 am ET : Initial Requirements 10:00 am ET: New Home Sa les Fred ag March 24 Before the bell: Express (EXPR) 8:30 a.m. ET: Durable goods orders in review The big macroeconomic event this week — aside from the SVB fallout — was the release of the February consumer price index on Tuesday , which matched analysts’ expectations. Most importantly, it showed a slowdown in the annual rate of inflation, both at the headline level and also with food and energy removed, known as the core index. Tremors about the stability of the global banking system, spurred by struggles in the First Republic (FRC), led to a sell-off on Friday. Still, US stocks fared better for the week, with the S&P 500 up 1.5% and the Nasdaq up 4.5%. Only the Dow lost ground, down 0.1%. While some usually think of a shift to technology as a “risk to” trade, there is the view that what we actually saw was a flight to safety following the collapse of Silicon Valley Bank (SVB) and heightened fears that a recession is on the horizon. In addition to a decline in Treasury yields – when bond prices rise (due to increased buying), interest rates fall – energy stocks fell. Both moves are signs of recession fears. A weakening of economic activity will drag down the demand for energy, so the thinking goes. Instead, we saw a move into the high-quality names that are not only at the heart of global productivity, but also have the ability to trim some fat to protect profit margins and display some of the strongest balance sheets in the world. On Wednesday, the producer price index for February came in weaker than expected, with a monthly decline compared to expectations for an increase. Retail sales in February, also published on Wednesday, were in line with expectations. On Thursday, initial jobless claims for the week ended March 11 fell to 192,000, down 20,000 from the previous week and below expectations of 205,000. On Thursday, we also learned that housing starts for February were up 9.8% from January and down 18.4% from a year earlier. Building permits rose 13.8% monthly (-17.9% annually), both above expectations. Finally, industrial production on Friday was unchanged in February compared to January. Capacity utilization also held steady at 78%, in line with January’s reading. Under the hood, the communications services sector led the upside, followed by technology and utilities, while energy led the downside, followed by financials and materials. Meanwhile, the US dollar index is hovering just below 104. Gold is trading in the upper $1,900s per ounce. ounces. WTI crude oil prices have pulled back to around $66 a barrel. barrel, while the yield on the 10-year government bond fell back to around 3.4%. No portfolio companies reported earnings this week. (See here for a complete list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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U.S. Federal Reserve Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee (FOMC) at Federal Reserve headquarters, July 27, 2022, in Washington, DC.
Drew Anger | Getty Images
Two things will capture all the market’s attention in the coming week: the Federal Reserve’s meeting in March and the government’s ongoing attempts to calm concerns about the banking system.