Stocks finished an extremely volatile week with small gains, as the rescue of First Republic Bank (FRC) by the 11 largest U.S. lenders raised hopes that a broad banking crisis will be averted; meanwhile, the trouble in financials cemented the view that the Federal Reserve will not hike interest rates by more than 25 bps.
Technology stocks led the equities higher with large gains, as stock markets cheered their limited exposure to the banking sector. It only goes to show that there are always stocks that can buck the trend even in the most difficult markets; it’s a good idea to screen for those before making an investment decision.
This week we’ll see published a number of very important reports and economic decisions. It’s worth watching for the following economic news items, as all of them can prove to be major market movers. For a full listing of all upcoming economic events, check out TipRanks Economic Calendar.
Fed Interest Rate – Wednesday, 3/22 – This week, we will finally learn what the Fed Interest Rate Decision will be; the markets expect the U.S. central bank to hike rates by 0.25% to 5%, their highest level since the summer of 2007, before the housing crisis unfolded into a global financial crisis. While a 25 bps rate increase is already priced in by the stock markets, a larger than expected hike will mean even more pressure on risky assets, including stocks.
Durable Goods Order – Friday, 3/24 – On Friday, we will receive readings of the Durable Goods Orders, expected to rise 0.9% from January’s -4.5%. Durable goods orders reflect new orders placed with domestic manufacturers for delivery of long-lasting high cost manufactured goods, such as machinery, equipment, and vehicles. Durable goods orders are a key economic indicator for the assessment of the near-term manufacturing activity; a higher reading would mean stronger business confidence in the economy, which is a positive for stocks.
Preliminary March PMI Reports – Friday, 3/24 – These reports are expected to steal the markets’ attention. Manufacturing PMI is forecasted to rise a little from February’s 43.7, still pointing at contraction; Services PMI is expected to increase further from February’s 50.6, showing faster expansion of the services sector. The PMIs are reports on the economic activity in the Manufacturing and the Services sectors, serving as an important indicator of business conditions and the overall economic condition in the United States. Readings above 50 imply the activity in the sector is expanding, whereas a result below 50 points at a contraction, and weighs negatively on the stock market.