Mar 23, 2023
Tech giants drive U.S. stock rebound while banks drop
BNN Bloomberg's closing bell update: Mar. 23, 2023
The stock market shrugged off losses, with traders piling into some of the world’s largest technology companies that are seen by many on Wall Street as a kind of shelter in times of stress and economic uncertainties.
Gains in megacaps like Apple Inc. and Microsoft Corp. put the Nasdaq 100 near the threshold of a bull market after an almost 20 per cent surge from its December low. In the wake of the banking turmoil that has rattled markets around the globe and added to recession fears, the cohort of tech stalwarts that are flush with cash has largely outperformed this month. Banks remained under pressure even after Treasury Secretary Janet Yellen’s remarks that the U.S. would be ready for any necessary additional deposit actions.
Shorter-dated Treasury yields were down once again, with swaps linked to policy meeting dates now showing the central bank benchmark ending 2023 around three quarters of a point below its new, post-decision level. Federal Reserve Chair Jerome Powell insisted Wednesday that rate cuts are not his “base case.”
“The push-and-pull between financial market stability and inflation that is receding more slowly than anyone would prefer will further complicate an already significant challenge for the Fed, increasing the risk of a policy misstep and keeping the door open for a potential recession on the horizon,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
In other corporate news, Block Inc. tumbled after Hindenburg Research said it’s betting on a decline in the stock, alleging the payments company led by Jack Dorsey facilitated fraudsters who took advantage of government stimulus programs during the pandemic. Block called Hindenburg’s claims “inaccurate and misleading” and said it’ll explore legal action.
Now hedge funds couldn’t have picked a worse time to turn bullish on the dollar.
After betting against the greenback for 13 straight weeks, speculators flipped to a net long position in the week ended March 14, according to data from the Commodity Futures Trading Commission. The shift came days just before the Fed tempered its language around how much additional policy tightening might be needed, sending the dollar sliding.
A gauge of the greenback is down for a sixth straight session — its longest losing streak since April 2021.
On the economic front, applications for U.S. unemployment benefits unexpectedly eased for a second week, underscoring a still-tight job market in which employers are reluctant to reduce headcount. Sales of new homes unexpectedly rose in February after a downward revision to the prior month, suggesting the housing market is beginning to stabilize after a tumultuous year.
Elsewhere, the Bank of England pushed ahead with another interest rate increase despite turmoil in the banking sector, predicting the UK economy will avoid a recession for now and that inflation remains a risk. The pound rose, and investors priced in more certainty of at least one more rate hike later this year.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- U.S. durable goods, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.3 per cent as of 4 p.m. New York time
- The Nasdaq 100 rose 1.3 per cent
- The Dow Jones Industrial Average rose 0.2 per cent
- The MSCI World index rose 0.5 per cent
- The Bloomberg Dollar Spot Index fell 0.1 per cent
- The euro fell 0.1 per cent to US$1.0841
- The British pound rose 0.2 per cent to US$1.2290
- The Japanese yen rose 0.7 per cent to 130.54 per dollar
- Bitcoin rose 3.5 per cent to US$28,360.29
- Ether rose 4.8 per cent to US$1,821.05
- The yield on 10-year Treasuries declined six basis points to 3.38 per cent
- Germany’s 10-year yield declined 13 basis points to 2.20 per cent
- Britain’s 10-year yield declined nine basis points to 3.36 per cent
- West Texas Intermediate crude fell 2.3 per cent to US$69.25 a barrel
- Gold futures rose 2.6 per cent to US$2,018.70 an ounce