News

Published: Mar 10, 2023
Updated: Mar 10, 2023

US Markets Tank Ahead of Job Data and CPI; Banking Shares Fall After Silvergate Capital Collapse

The US markets faced a major setback as they tanked ahead of the release of job data and CPI early next week. The collapse of crypto financier Silvergate Capital also led to a broad-based fall in banking shares. The jobless claims in the US rose to a 2.5 month high, signaling a slow labor market. This news has led to investors reducing their risk by selling stocks and finding value in less risky assets such as bonds.

Dow, SP500, and Nasdaq experienced a sharp decline, falling by 543, 74, and 238 points respectively. The Dollar Index was also affected, dropping to 105.23. The bond yield for 3/6/12 months went above 5%, while the yield for 2 years stood at 4.80% and 10 years at 3.87%. This indicates an inversion, which could lead to further market turmoil.

Silvergate Capital Collapse Leads to Broad-Based Fall in Banking Shares

Silvergate Capital's collapse caused a 42% fall, leading to a selloff in Bitcoin, which fell for the fourth straight day to around $20K. The Fed's recent change in narrative has driven the stocks lower for most of January and late December. The market rallied on the assumption that the Fed would stop raising rates or would pause sometime in the near future. However, Powell made it clear that this was not the case.

Economists Expect Positive Surprise to Upside for Friday's Nonfarm Payrolls Data

The market is currently looking for a bullish catalyst but cannot find one. The investors are finding value in less risky assets like bonds that offer an attractive yield. Some economists expect a positive surprise to the upside for Friday's nonfarm payrolls data. This could mean bad news for the market, as good news is bad news for the markets. It could lead to a sell-off of equities and support the case for an outsize Fed hike.

Powell Reiterates Warning Message to Lawmakers

Powell has reiterated his warning message to lawmakers that the central bank may raise interest rates higher than previously expected. While no decision has been made regarding the March meeting, traders are bracing for a larger-than-expected hike following a batch of strong economic data in recent weeks.

Implications and Future Outlook for Global Markets and Investors

The recent fall in the US markets has been caused by several factors, including the collapse of Silvergate Capital and the rise in jobless claims. The investors are reducing their risk and finding value in less risky assets like bonds, which offer an attractive yield. The market is currently looking for a bullish catalyst but cannot find one. It remains to be seen how the market will react to the upcoming job data and CPI release.