Market Snapshot: U.S. stocks mostly lower, digesting data, Silicon Valley Bank hearing

What’s driving markets

Another day without any major negative news from the financial sector is allowing equity markets to catch a bit of a breather on Tuesday.

“This is a market that is stabilizing,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s MS, -0.11% global investment office. But while investors regain footing after the tumult in the regional banks sector KRE, during recent weeks, there’s still open questions, he said.

To name a few, there’s the questions whether there’s any spillover consequences for other parts of the economy, how much higher interest rates will go, how tight lending conditions will become and what broader effect that will have.

“In the face of the unknown, the market is always going to err on the downside,” Loewengart said in a phone interview.

Instead of particular data informing Tuesday’s trading session so far, Loewengart said “it’s more about investors still trying to digest what lies ahead in the form of further contagion or stricter montary policy.”

Investors hope to gain more clarity — and more confidence — from the federal government’s top financial regulators at the start of two days of Congressional testimony about the supervision of Silicon Valley Bank and Signature Bank. The pair failed earlier this month and rocked the banking sector.

Federal Reserve Vice Chairman for Supervision Michael Barr, Federal Deposit Insurance Corp. Chairman Martin Gruenberg and Treasury Undersecretary Nellie Liang are testifying before the Senate Banking Committee.

Federal Reserve supervisors met with Silicon Valley Bank’s chief financial officer in October 2021 to emphasize worries about how the bank was managing interest rate and liquidity risks. “Essentially the risk model was not at all aligned with reality,” Barr told lawmakers.

Silicon Valley Bank bank collapsed at the fastest pace since the two-centuries old U.K.-based Barings merchant bank failed after unauthorized trades in 1995,  Bank of England governor Andrew Bailey said at a parliament committee on Tuesday. U.K.’s banking sector was in a “very strong position,” he said.

The reduced concerns about a credit crunch crimping economic activity are helping push up government bond yields though. The 2-year Treasury yield TMUBMUSD10Y, 3.560%, which is particularly sensitive to monetary policy, last week fell below 3.6% but was back to 4% on Tuesday.

The recent bank worries in America and Europe have not changed Vanguard’s outlook, said Joe Davis, chief global economist at the asset managment giant. It’s still about the Federal Reserve and the unfinished business of bringing down inflation.

The job “was always going to be a challenge, likely to entail higher unemployment and tighter credit and financial conditions. Deterioration in financial conditions has long been part of our expectation for a modest recession later this year,” Davis said.

An important clue to the likely trajectory of Federal Reserve policy will come on Friday when the PCE inflation gauge for February will be published.

Tuesday’s data includes advanced U.S. trade balance in goods, showing the deficit in goods increased 0.6% to $ 91.6 billion in February —basically flat in the month. Meanwhile, advanced retail inventories increased 0.8% and advanced wholesale inventories climbed 0.2% in February.

The S&P Case-Shiller home price index on Tuesday showed prices falling 0.4% from December to January, though prices are still up 2.5% year over year. A separate report from the Federal Housing Finance Agency showed a 0.2% increase in January home prices compared to December.

U.S. consumer confidence in March beat forecasts, rising 104.2 from a revised 103.4. Despite the financial anxiety and stressors out there now, the upbeat numbers show the job market’s strength and consumer hopes for economic improvements.

Mark Newton, head of technical strategy at Fundstrat observed that the market had proved resilient “at a time when most investors are expecting stock indices to fall” and that traders should note the S&P 500 (SPX) will soon be entering the usually bullish month of April.

“SPX, DJIA and NASDAQ remain largely range-bound near-term as part of their uptrend from 3/13. This sideways “grind” in prices isn’t necessarily bearish; However, a move back above QQQ-314 and SPX 4040 will be necessary to help jump-start the next leg of the rally,” Newton added.

QQQ, -0.90% is the ticker for the Invesco ETF representing the Nasdaq 100.

Companies in focus

• Alibaba Group Holding Ltd. BABA, +11.66% shares are up 11% after an announcement from the Chinese e-commerce giant that it is reorganizing into six business groups with their own CEOs and boards. The company’s six businesses will be its Cloud Intelligence Group, its Taobao Tmall Commerce Group, its Local Services Group, its Cainiao Smart Logistics group, its Global Digital Commerce Group, and its Digital Media and Entertainment Group.
• Walgreens Boots Alliance Inc.  WBA, +3.92% shares are up over 3% after its fiscal second quarter profits beat expectations, in spite profits being lower than a year ago due to less COVID-19 testing and fewer vaccinations. Taking out nonrecurring items, the pharmacy and health care services chain had adjusted earnings per share of $ 1.16, above FactSet consensus of $ 1.10.
• Walt Disney Co. shares are basically unchanged Tuesday . The company is beginning a layoff process this week that will ultimately cut 7,000 jobs, CEO Bob Iger said in a memo. This is “part of a strategic realignment of the company, including important cost-saving measures necessary for creating a more-effective, coordinated, and streamlined approach to our business,” Iger said.