The Long and Short of it, week ending 10 March 2023

Publication Type: Market Commentaries
The Long and Short of it, week ending 10 March 2023

U.S stock markets ended noticeably lower last week, pressured – initially – by growing Fed-induced recession concerns and – later – by contagion fears excited by the failure of Silicon Valley Bank on Friday. Fed Chair Powell’s testimony before the Senate on Tuesday added to expectations of a more aggressive Fed with Chairman Powell commenting that the strength of the jobs market, spending and factory production may warrant a faster pace of rate hikes. As a result, all 3 major stock indexes fell more than 1 ¼ percent. His testimony before the House on Wednesday seemed to slightly walk back Tuesday’s comments, with Chairman Powell saying no decision had been made regarding the size of the rate hike in this month’s upcoming meeting, lifting markets off their Tuesdays’ lows. All 3 major indexes fell sharply Thursday, ostensibly due to an initial jobless claims number, though greater than expected, still indicative of a tight jobs market, bolstering expectations of a strong jobs report Friday. News of Silicon Valley Bank’s distress (i.e., needing to raise capital after its sale of assets left a significant shortfall) with its stock price plummeting 60%, may have also contributed to Thursday’s decline as well. Friday’s eagerly anticipated jobs report, though sending mixed signals, provided reason for the Fed to refrain from returning to its aggressive tightening policy and maintain its 25bp, wait-and-see approach. While jobs created increased more than expected, the unemployment rate ticked higher and wage pressures cooled. Stock indexes attempted to move higher following the report but news of Silicon Valley Bank’s failure (and the accompanying contagion fears) pushed all 3 major stock indexes over 1% lower. Treasury rates across the curve moved sharply lower, reacting to both safe-haven demand and growing sentiment the Fed, mindful of Silicon Valley Bank fallout, would need to ease sooner than previously expected. Similarly, The U.S. dollar, up over 1% through Wednesday, weakened significantly, also reacting to expectations of changing Fed monetary policy. For the week, the S&P 500 Index fell 4.5% to 3,861.59, the Nasdaq Composite Index dropped 4.7% to 11,138.89, the Dow Jones Industrial Average declined 4.4% to 31,109.96, the 10-year U.S. Treasury rate fell 26bp to 3.70% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.1%.

European stock indexes also moved also moved lower last week but not quite as sharply as U.S. indexes. Hawkish comments from ECB officials pronouncing the need for more interest rate hikes and a lower-than-expected Chinese GDP growth target, moved both the STOXX 600 and FTSE 100 Indexes lower through Tuesday. Testimony by Fed Chair Powell before the U.S. Senate on Tuesday indicating the current strength of the U.S. jobs market and economy may predicate the need for larger rate increases also pressured European markets lower. Poorly performing mining and real estate stocks, hurt by rate hike and Chinese demand concerns, moved both indexes lower Thursday. Silicon Valley Bank’s failure Friday added to risk-off sentiment Friday – especially for financial stocks - sending index levels lower while increasing safe-haven demand for government bonds, moving government bond rates sharply lower. For the week, the STOXX 600 Index fell 2.3% to 453.76, the FTSE 100 Index dropped 2.5% to 7,748.35, the 10-year Gilt rate fell 2obps to 3.63%, the 10-year Bund rate decreased 18bps to 2.50% and the British pound and euro were practically unchanged with respect to the U.S. dollar.

Top performing ETPs over the week

. 3x Long ETPs 3x Short ETPs
UK +3x Rolls-Royce (3LRR) +30.2 % -3x Barclays (3SBC) +25.3%
Product List   


The Long and Short of it, week ending 10 March 2023

Related Products
Related Research