What you need to know this week

March has long been expected to serve as a pivotal month for the Federal Reserve.

And after the first two weeks of the month brought the central bank a year of headlines, in the week ahead what investors expected to be the main event finally arrives.

On Wednesday, the Fed will announce its latest monetary policy decision at 2 p.m. ET, with Fed Chairman Jerome Powell expected to follow that announcement with a press conference at 2:30 p.m. ET. Along with its policy decision, the Fed will also issue updated forecasts for inflation, unemployment, economic growth and interest rates for the rest of this year and beyond.

After Powell testified before the Senate Banking Committee on March 7 that the Fed would likely raise rates “higher than expected” in response to stubborn inflation, investors were almost certain the Fed would raise its target rate range. reference interest of 0.50% on March 22.

Two days later, an incipient banking crisis cast a shadow over the Fed’s plans. On Sunday evening, March 12, the Fed was part of a government-led deposit support package across the U.S. financial system. Investors are now roughly split on whether the Fed will raise rates on Wednesday.

“We still expect the Fed to raise its key rate by 25 basis points next week, but also deliver a less strident inflation-fighting message than thought a few weeks ago aimed at calming market anxiety,” Bob Schwartz, senior economist at Oxford Economics, wrote in a note to clients on Friday.

“While banking issues will certainly get attention, we believe this is not a systemic problem but rather a liquidity issue that the Fed can contain with its lending facilities,” Schwartz added. . “The wild card going forward will be the reaction of financial markets, as maintaining financial stability is one of the Fed’s mandates.”

FILE – Federal Reserve Chairman Jerome Powell speaks during a press conference Wednesday, Dec. 14, 2022, at the Federal Reserve Board Building in Washington. As Silicon Valley Bank’s primary regulator, the Federal Reserve has come under heavy criticism from financial watchdogs and banking experts. (AP Photo/Jacquelyn Martin, File)

Last week, government officials, regulators and private sector leaders from across the banking world sought to stabilize the US financial system after the rapid collapse of Silicon Valley Bank and the seizure of Signature Bank.

The week’s key development came on Thursday afternoon when a consortium of 11 US banking giants announced it would funnel some $30 billion in deposits to the First Republic (FRC), which investors and regulators feared would be the next institution to fail.

Even with last week’s capital injection, First Republic shares are down more than 70%; On Friday alone, the stock fell about 33%.

Amid this flurry of banking sector news, major US equity indices ended the week mixed, with the Nasdaq Composite (^IXIC) up more than 4%, the S&P 500 (^GSPC) up 1, 4% and the Dow Jones Industrial Average (^DJI) posting modest losses.

Financial stocks were hit hard, however, with the KBW Bank Index (^KBX) falling more than 14% on the week, while the KBW Regional Bank Index (^KRX) lost just over 9%. %. Since early March, these indices have lost 27% and 17% respectively.

Over the weekend, US investors kept an eye on Europe, where the latest reports from the Financial Times suggested that UBS (UBS) was close to striking a deal to take over Credit Suisse (CS) in part of a billion-dollar deal that would value Credit Suisse at around $0.27. per share. Trading in Credit Suisse shares in New York closed Friday’s session at $2.01.

While developments in the Federal Reserve and the global banking world will remain the focus of investors’ minds, a handful of economic and earnings reports will command attention throughout the week.

Data on existing home sales released on Tuesday and Wednesday morning’s weekly update on mortgage applications will offer readings on the housing sector, which has been an unexpected beneficiary of the banking crisis given the collapse Treasury yields and the resulting decline in mortgage rates.

Investors will also keep a close eye on Thursday morning’s reading of services and manufacturing activity from S&P Global.

On the earnings side, results from Foot Locker (FL) Monday, Nike (NKE) Tuesday, Darden Restaurants (DRI) Thursday will offer updates on the state of the US consumer.

Economic Calendar

Monday: No notable datasets for publication.

Tuesday: Existing Home Sales, February

Wednesday: MBA Mortgage Applications; Federal Reserve monetary policy decision

THURSDAY: Initial jobless claims; Sales of new homes, February; Kansas City Fed Manufacturing Index

Friday: Durable goods orders, February; S&P flash U.S. composite PMI

Earnings Calendar

Monday: Foot Locker (FL), Pinduoduo (PDD)

Tuesday: Nike (NKE), GameStop (GME), Tencent Music (TME), AAR Corp. (AIR)

Wednesday: Ollie’s Bargain Outlet (OLLI), Chewy (CHWY), Petco (WOOF), Winnebago (WGO), Steelcase (SCS), Worthington Industries (WOR), KB Home (KBH)

THURSDAY: General Mills (GIS), Darden Restaurants (DRI), Accenture (ACN), FactSet (FDS)

Friday: No notable companies are expected to report.

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