“What’s Driving the Markets: Yellen’s Views on Banks, Anticipated Rate Hikes, and SEC Crackdown on Crypto”
- Global stock markets followed the U.S. down as investors focused on the conflicting guidance from Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell on the U.S. banking sector. Yellen said the U.S. isn’t planning “blanket insurance” for U.S. bank deposits, acknowledging the limits of Fed action to stabilize smaller banks in the wake of recent collapses. The Chicago and Kansas City Feds are set to publish their monthly business surveys, while current account data and weekly jobless claims are due at 08:30 ET (12:30 GMT). Recruitment firm Indeed is cutting 15% of its staff, anticipating a hiring slowdown in the next couple of years.
- The Fed’s decision to raise the Fed Funds target range by 25 basis points has led to a suite of interest rate hikes worldwide. The Swiss National Bank raised by 50 basis points, and Norway hiked by 25 basis points. The Bank of England is expected to follow suit at 08:00 ET after hot inflation data for February. The Hong Kong Monetary Authority and the Philippines central bank both raised their key rates by the same amount, while Turkey is set to be the only outlier, expected to keep its one-week repo rate at 8.5%.
- U.S. stocks are set to open mixed, with some solace taken from the Fed’s new projections, which foresee a lower interest rate path over the next two years than previously. By 06:25 ET, Dow Jones futures were effectively flat, while S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.8%. The three main cash indices had lost around 1.6% each on Wednesday after Powell’s press conference. Regional bank stocks are all modestly higher after big losses on Wednesday in response to Yellen’s comments. Chinese Internet stocks are also moving higher after conglomerate Tencent reported a return to revenue growth in the last quarter. TikTok founder Shou Zi Chew will testify in Congress in an attempt to forestall the closure of a service that has become a powerful competitor to Meta, Alphabet, and others in social media.
- While cryptocurrencies may be enjoying a moment in the sun, U.S. regulators continue to tighten the noose. The Securities and Exchange Commission charged TRON founder Justin Sun and a handful of celebrity promoters with illegally distributing securities and manipulating the market in them. Meanwhile, Coinbase said it expects the SEC to initiate an enforcement action against its staking programs, a month after rival Kraken shuttered its staking operation and paid $30 million to settle SEC charges. Coinbase stock was down another 11% in premarket trade, but Bitcoin and other digital currencies were down by a more modest 1%-2%.
- Crude oil prices weakened overnight but held above the $70 a barrel threshold on support from the cheaper dollar, which improves the terms of trade for most big oil importers. U.S. crude futures were down 0.9% at $70.27 a barrel, while Brent crude was down 0.9% at $76.03 a barrel by 06:15 ET. The market remains under pressure after a surprise increase in U.S. government-assessed stockpiles, which rose by over 1 million barrels to their highest in nearly two years last week. The Fed’s downward revision to U.S. growth forecasts for this year and next only underlined the shifting balance between demand and supply.