Get your skates on because this week could rev up fast, with inflation data and earnings from some of Wall Street’s biggest banks at the end of it.
As for Monday, interest-rate sensitive tech stocks are pointing to a weak start after Friday’s strong payrolls data, which may mean another Fed hike in May.
Another set of numbers that sneaked out last week and are drawing attention is the latest Fed data that showed a sharp drop-off in bank lending post the Silicon Valley collapse. Look out, says our call of the day from the chief economist and partner at Apollo Global Management, Torsten Slok, who has doubled down on his view that the “credit crunch has begun.”
“Fed hikes were already cooling the economy, and the latest weekly Fed data shows that the banking sector response since SVB is magnifying the speed of the slowdown,” Slok said, in a note to clients.
He draws attention to several notable points in that data, such as the biggest two-week decline in bank lending in U.S. history:
Federal Reserve Board, Haver Analytics, Apollo Chief Economist
The biggest two-week fall in lending to real estate on record:
Federal Reserve Board, Haver Analytics, Apollo Chief Economist
What else? Slok highlighted the biggest two-week fall in bank lending to corporates on record, the biggest decline ever in lending to multifamily construction, a fall in auto lending, and a surge in banks selling mortgages and drawing on the Fed and the Federal Home Loan Bank (FHLB) system to help meet deposit demand:
FHLB, Haver, Apollo Chief Economist
Bottom line, Slok said “the immediate risks in the banking sector are starting to fade, but the behavioral change in the banking sector is beginning to weigh on the economic outlook. In short, the credit crunch has started.”
Also weighing in on that data was TS Lombard’s chief US economist Steven Blitz, who had this to say: “The mismanagement of deposits flows against assets was never going to tank the banking system. It was, however, going to shrink bank balance sheets and reverse credit extensions, and this, in turn, is what tanks the economy. Not tomorrow, and lending is not going to decline every week, but my anticipated reversal of credit flows has begun and it will have the usual effect – recession,” he said.
As for what to do, Paul Singer, the hedge-fund manager who warned on subprime mortgages ahead of the 2008 bust, said following the recent banking crisis, an “extended period of time of jagged moves” in financial markets should be expected as “people come to grips with excesses in the financial system.” That’s according to an interview he gave The Wall Street Journal last week, and Singer added that he thinks the safest investor bet for now is short-term government debt.
“Because of the inverted yield curve, such debt pays a decent return with virtually no chance of a negative outcome,” he says.
Last word goes to Matt Maley, Miller Tabak + Co.’s chief market strategist. who puts the lingering recession worries into perspective, with some advice.
“Recessions = lower earnings…and that’s not good for a stock market that is trading at almost 19x forward earnings. With this in mind, we believe investors should continue to raise cash…continue to stick with companies with strong balance sheets…as well as defensive names………….It’s never different this time,” he told clients.
Read: Recession threat may mean stock-market investors no longer see bad news on economy as good news
The markets
Stock futures
ES00,
NQ00,
are down. Treasury yields
TMUBMUSD10Y,
TMUBMUSD02Y,
are mixed, and oil is lower.
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The buzz
JPMorgan Chase
JPM,
Citigroup
C,
Wells Fargo
WFC,
PNC Financial Services
PNC,
and BlackRock
BLK,
all on tap. Analysts are not wildly optimistic about those results that will kick off earnings season, following two of the biggest bank failures in U.S. history.
More tech gloom as top chip maker Taiwan Semiconductor Manufacturing
TSM,
2330,
reported its first annual revenue drop in nearly four years.
Tupperware stock is down 11% in premarket after the food-storage products maker said it has hired financial advisers to help navigate its near-term challenges.
Records smashed after a $200 million opening for “The Super Mario Bros. Movie,” from Comcast’s
CMCSA,
Universal and Illumination.
Wholesale inventories are due at 10 a.m., but the week’s main event will be consumer prices on Wednesday, followed by producer prices on Thursday. Retail sales, industrial production and a consumer sentiment gauge are scheduled for Friday, with several Fed speakers also in the weekly economic mix.
And Tuesday’s NFIB small business optimism index will be noteworthy as a gauge of credit conditions, say some:
@ChrisWeston_PS
Best of the web
More post-pandemic fallout: consumers are falling behind on loans for cars that aren’t even working. (subscription required)
The chart
Trouble for tech? So says this chart from McClellon Financial, flagged by Callum Thomas’s Weekly ChartStorm.
“On first glance the recent price action in the Nasdaq 100 looks promising — the index is making higher highs and higher lows, and the 100-day moving average is turning up. But taking a look under the hood, it has not been a broad-based move, indeed, this chart highlights a bearish divergence in play,” points out Thomas:
Random reads
Boxing goes to the opera.
A 78-year old bank robber named Bonnie racks up hew third heist.
Bunny finds work as California police “wellness officer.”
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This post was originally published on Market Watch
