What you need to know this week

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

Tuesday’s February consumer price index (CPI) and Wednesday morning’s February retail sales reading will likely bolster investors’ expectations for the Fed’s next policy move.

Consensus forecasts call for the CPI to rise 6% from a year ago on an overall basis and 5.5% on a “basic” basis in February, according to data from Trading Economics. A 6% rise in inflation would mark the smallest annual increase in consumer prices since September 2021.

Investor focus on the Fed’s next steps, however, has been usurped as a top priority for investors in recent days with Friday’s shock collapse of Silicon Valley Bank and fears that the second-biggest bankruptcy banking history of the United States could mean for the financial system at large. .

How futures open on Sunday evening and the follow-up, if any, to 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 of the initial reactions to the Silicon Valley Bank collapse — namely, that it represents a one-off failure rather than the start of something bigger.

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

“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 did not reprice higher.”

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

In a note to clients published on Friday, Kabir Caprihan, an analyst at JPMorgan, echoed much of that sentiment, writing: “At the outset, we do not believe [Silicon Valley Bank’s collapse] be systemic, but it reflects some of the structural issues we have highlighted in our outlook and what prompted our underweight to regional banks.”

The particular scale and challenges that brought Silicon Valley Bank down are unique – its exposure to the money-burning tech world most punished by investors during the Fed’s rate-hike campaign topping the list . But the overall story of a surge in deposits in 2021, outflows in recent months and losses in securities portfolios should challenge some regional banks in the near term.

A report from Bloomberg on Saturday evening said the FDIC – which took control of the bank on Friday morning – was working to recover some of the uninsured deposits held with the bank, with the outlet reporting that payments between 30 % and 50% of deposits were under discussion. .

Fed and FDIC officials also discussed creating a fund to support deposits from other institutions that may face a crisis similar to the one that took down Silicon Valley Bank in the coming weeks. reported Bloomberg. Across the Atlantic, UK Finance Minister Jeremy Hunt said the UK government was working to ensure that any UK business facing cash flow needs following the bankruptcy of SVB “is able to meet its cash to pay its staff.

Semafor reported over the weekend that hedge funds had reached out to startups with cash tied up at Silicon Valley Bank with offers to buy their deposits at a discount, as some companies face to a cash crunch with a looming payroll and a potentially long way to go. on money deposited with the failing bank.

It comes as regulators sense buyers for Silicon Valley Bank as well as the wealth management, investment and securities businesses housed under the bank’s former parent company, SVB Financial (SIVB). Employees of the failed Silicon Valley Bank will remain employed for 45 days before being laid off, Bloomberg reported on Saturday.

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

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

“The circumstances of the Silicon Valley Bank collapse are unique enough that they are unlikely to trigger widespread financial contagion,” wrote Paul Ashworth, chief economist for North America at Capital Economics. “Nevertheless, it’s a timely reminder that when the Fed focuses solely on squeezing inflation by raising interest rates, it often ends up breaking things.”

Economic calendar

Monday: No major economic release planned.

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

Wednesday: MBA Mortgage Applications; Producer prices, year on year, February (+5.4% expected vs. 6% in January); Producer prices, month on month, February (+0.3% expected vs. +0.7% in January); Core PPI, year-on-year, 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 on 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 at an annualized rate against 1.339 million in January); Housing starts, February (1.31 million annualized vs. 1.309 million in January); First jobless claims (205,000 expected vs. 211,000 last week); Philadelphia Fed Manufacturing Survey

Friday: Industrial production, February (+0.4% expected against 0% in January); University of Michigan Consumer Sentiment, March Preliminary Reading

Earnings Calendar

Monday: GitLab (GTLB)

Tuesday: Lennar (LEN); Guess (GES); Sentinel One (S); Stone Co (STNE)

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

THURSDAY: FedEx (FDX); General Dollar (DG); Clothing G-III (GIII); Jabil (JBL); Signet Jewelers (SIG); Academy Sports (ASO); Williams-Sonoma (WSM); Trager (COOK)

Friday: No notable benefits expected for release.

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