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All three major U.S. stock indexes slide; Dow down most
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Energy down most among S&P sectors; only utilities gains
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Euro STOXX 600 index slides >2%
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Dollar, gold up >1%; crude down ~5%; bitcoin edges down
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U.S. 10-Year Treasury yield tumbles to ~3.42%
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ECONOMY TAKES A STAB AT COOLING: PPI, RETAIL SALES (1137 EDT/1537 GMT) Two closely watched data sets celebrated the worrisome Ides of March by suggesting the Fed's repeated stabs at cooling the economy could at last be bringing down that tyrant inflation. To start with, the Labor Department's producer prices index (PPI) did Fed watchers a solid by offering the most concrete evidence of inflationary cool-down in months. The prices U.S. companies get for their goods and services at the figurative factory door unexpectedly dropped by 0.1% in February, versus a 0.3% gain forecast by economists. Year-on-year, the "final demand" measure - which tracks sales to consumers - cooled drastically, to 4.6% from January's downwardly revised 5.7%, a 1.1 percentage point plunge. "The downward surprise to February's PPI report is good news for the Fed," writes Matthew Martin, U.S. economist at Oxford Economics. "Together with the downward revision to January's increase (the report) indicates that cooling demand is leading to a further slowdown in price increases, particularly in the goods sector." Digging deeper into the data set, "intermediate demand," which refers to business-to-business sales, showed a 3.8% plunge in raw materials and a shallower 0.4% dip in processed goods. Excluding food and energy, raw and processed goods, prices rose by 1.2% and 0.1%, respectively. Core PPI - which excludes food, energy and trade services - rose by 0.2% from the prior month and 4.4% from February 2022. Here we trot out our trusty inflation dashboard yet again, which shows how much the major indicators need to cool before approaching Powell & Co's average annual 2% inflation target: In another signal that the central bank's efforts to toss a bucket of cold water on demand is working, receipts at U.S. retailers fell by 0.4% in February, steeper than the projected 0.3% decrease. Even so, the fall comes after January's gain, which was revised up to 3.2% from 3.0%. Breaking it down, a 4% drop in department store sales, a 1.8% decline in autos/parts and a surprising 2.2% slide in food/drink services all weighed on the topline, despite a 1.6% gain for non-store (online) retail, a 0.9% uptick in health/personal care items and a 0.6% rise in grocery receipts. "Sifting through the details, the picture that emerges is that the consumer is pulling back on big ticket discretionary purchases and concentrating on staples," says Thomas Simons, economist at Jefferies.
"The notion that consumers would be eating at home a little bit more after spending a lot at restaurants last month suggests that they are feeling a bit overextended." Core retail sales, which strips out autos, gasoline, building materials and food services - and most closely corresponds with the personal expenditures component of GDP - surprised in the other direction, rising 0.5% and standing on the shoulders of January's upwardly revised 2.3% surge. Analysts expected this metric to fall by 0.3%. Wall Street paid little attention to the data, as fresh worries from the banking sector sent investors fleeing for safety.
Safe-haven assets including the U.S. dollar and gold were
up, while equities were laid low by the Brutus of contagion
fears.
(Stephen Culp)
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WALL ST SLAMMED BY BANK SECTOR, ECONOMIC WORRIES (1013
EDT/1413 GMT)
Wall Street's three major averages are off sharply early on
Wednesday, after a brief reprieve on Tuesday, with the spotlight
currently on European banks as well as global economic concerns.
While U.S. banks are also weak, in Europe, shares of Credit Suisse tumbled to a record low after the bank's largest investor said it could not provide the Swiss bank with more financial assistance.
The collapse of three U.S. banks in recent days, including
hotshot Silicon Valley Bank, had sent jitters through U.S. bank
stocks and global markets as investors worried about what
financial sector weakness means for the economy.
Specifically referencing the financial sector's problems," Torsten Slok, chief economist at Apollo Global Management, said he now expects a "hard landing," which typically implies a big recession, compared with his previous expectation for "no landing," which implies no recession at all. Slock's changing view is driven by tighter credit conditions. With small banks accounting for 30% of all loans in the U.S. economy, and regional and community banks now likely to have to "spend several quarters repairing their balance sheets," he sees "much tighter lending standards for firms and households even if the Fed would start cutting rates later this year." As a result of all this, Slok does not see the Fed raising interest rates next week.
And the economist said: "We have likely seen the peak in both short and long rates during this cycle. Nearly all of the 11 S&P 500 industry sectors are in the red with energy falling most as oil prices are being crushed with financial stocks following close behind. All the S&P 500's banks are in the red with regional First Republic getting hit hardest. Even the biggest banks are flagging with JPMorgan down 4% and Goldman Sachs down 5%. The SPXBK hit its lowest level since Nov. 2020. The STOXX Europe 600 bank index is down more than 6% after touching its lowest level since early January. Here is your early trading snapshot taken at 1012 EDT:
(Sinéad Carew)
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U.S. STOCK FUTURES RED ON EUROPEAN BANK STRESS; U.S. DATA BELOW ESTIMATES (0900 EDT/1300 GMT) U.S. equity index futures are sharply lower in the wake of the release of the latest data on producer prices, retail sales, and a shift in concerns to European banks. The February PPI on a month-over-month and year-over-year basis came in below estimates. Ex-food/energy month-over-month was below the estimate, while the year-over-year reading was in-line with the estimate. March NY Fed manufacturing came in much weaker than expected:
According to the CME's FedWatch Tool, the probability of a 25 basis point rate hike at the March 21-22 FOMC meeting is now 56% from around 50% just before the numbers were released. There is now around a 44% chance that the FOMC will leave rates unchanged from around 50% prior to the data coming out. CME e-mini S&P 500 futures are down around 1.9%. The futures were sliding around 1.7% just before the data release.
All S&P 500 sector SPDR ETFs are lower in premarket trade. Financials are showing the biggest loss, off around 3.3%. This as the focus of the concern over banks has now shifted to Europe. The STOXX 600 Banks index is down around 7%. U.S. listed shares of Credit Suisse are slated to open down more than 25%. A check of premarket action in U.S. banking ETFs shows the SPDR S&P Bank ETF is losing more than 4%, while the SPDR S&P Regional Banking ETF is off about 5%. Of note, NYMEX crude futures are trading below $70.00, hitting their lowest level since December 21, 2021. Here is a premarket snapshot just shortly before 0900 EDT:
(Terence Gabriel)
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FOR WEDNESDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
