Closing Stock Market SummaryIt shaped up to be a pretty good day in the stock market, but it didn't start out that way. It started out with bank stocks remaining under pressure and Treasury yields declining in an ongoing flight to safety trade.
At their lows for the day, the Dow, S&P 500, and Nasdaq were down 1.0%, 0.6%, and 0.7%, respectively, as market participants also digested the news that the European Central Bank agreed to raise its key policy rates by 50 basis points due to inflation being projected to remain too high for too long.
Sentiment shifted around midmorning, though, when a Wall Street Journal report highlighted a potential private sector solution to the issues at First Republic Bank (FRC 34.27, +3.11, +10.0%), which had been down as much as 36.5% at its low today. The report suggested big banks had been discussing a capital infusion deal for FRC.
That news prompted a stark reversal in stock prices, which was presumably helped by short covering activity. Later in the day, it was confirmed that 11 banks, including JPMorgan Chase (JPM 130.75, +2.49, +1.9%) and Bank of America (BAC 28.97, +0.48, +1.7%), will make uninsured deposits totaling $30 billion into FRC.
Also, sentiment in the banking sector improved as Treasury Secretary Yellen told the Senate Finance Committee that "Americans can feel confident that their deposits will be there when they need them."
The idea of a private sector-led solution to the issues at FRC drove a broad rally effort, spearheaded by rebounding bank stocks and strong leadership from the mega cap stocks, which were relative strength leaders all day. The Vanguard Mega Cap Growth Index (MGK) rallied 2.6%.
The S&P 500 struggled initially to push past resistance at its 200-day moving average (3,939), but broke through that key technical level on renewed buying interest and finished near its highs for the day. The turnaround in the stock market fueled an unwinding of the safe-haven trade in the Treasury market. The 2-yr note yield, which traded as low as 3.85%, rose 19 basis points to 4.14% and the 10-yr note yield, which saw 3.37% today, rose nine basis points to 3.59%.
Nine of the 11 S&P 500 sectors closed with a gain led by information technology (+2.8%), communication services (+2.8%), and financials (+2.0%). The real estate (-0.1%) and consumer staples (-0.1%) sectors were the worst performers today.
- Nasdaq Composite: +12.0% YTD
- S&P 500: +3.2% YTD
- S&P Midcap 400: flat YTD
- Russell 2000: +0.6% YTD
- Dow Jones Industrial Average: -2.7% YTD
Reviewing today's economic data:
- Weekly Initial Claims 192K (consensus 215K); Prior was revised to 212K from 211K; Weekly Continuing Claims 1.684 mln; Prior was revised to 1.713 mln from 1.718 mln
- The key takeaway from the report is that initial claims were back below 200,000, reflective of a tight labor market that features a reluctance on the part of most employers to let employees go.
- February Housing Starts 1.450 mln ( consensus 1.313 mln); Prior was revised to 1.321 mln from 1.309 mln; February Building Permits 1.524 mln (consensus 1.345 mln); Prior 1.339 mln
- The key takeaway from the report is that the stronger-than-expected activity wasn't just a multi-unit story. Single-family starts were up 1.1% month-over-month while single-family permits increased 7.6%.
- March Philadelphia Fed Index -23.2 (consensus -13.0); Prior -24.3
- The key takeaway from the report is that "most future indicators weakened, suggesting that the firms continue to have tempered expectations for growth over the next six months."
- February Import Prices -0.1%; Prior was revised to -0.4% from -0.2%
- February Import Prices ex-oil 0.4%; Prior was revised to 0.2% from 0.3%
- February Export Prices 0.2%; Prior was revised to 0.5% from 0.8%
- February Export Prices ex-ag. 0.1%; Prior was revised to 0.6% from 0.8%
- The key takeaway from the report is the moderation in year-over-year changes. Import prices were down 1.1%, versus up 11.4%, for the 12 months ending February 2022. Export prices were down 0.8%, versus up 16.8% for the 12 months ending February 2022.
Looking ahead to Friday, market participants will receive the following economic data:
- 9:15 a.m. ET: February Industrial Production ( consensus 0.5%; prior 0.0%) and Capacity Utilization ( consensus 78.5%; prior 78.3%)
- 10:00 a.m. ET: February Leading Indicators ( consensus -0.4%; prior -0.3%) and March Univ. of Michigan Consumer Sentiment - Prelim (consensus 67.2; prior 67.0)
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