10 Things You Need To Know: March 14, 2023
Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Tue), PPI (Wed), retail sales (Wed), NAHB Housing Market Index (Wed), housing starts (Thu), industrial production (Fri), leading economic indicators (Fri), and consumer sentiment (Fri).
Trading Economics
March 10, 2023
The US economy unexpectedly created 311K jobs in February of 2023, well above market forecasts of 205K, and following a downwardly revised 504K in January. The reading continues to point to a tight labor market, with the economy adding an average of 343K jobs per month over the prior 6 months. It is also well above 100K per month considered necessary to keep up with growth in the working-age population.
Barron’s
March 13, 2023
“Even if SVB doesn’t trigger a broader financial contagion, it could still lead to a further tightening of credit conditions that tips the economy,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note. The Fed’s most recent Senior Loan Officer Opinion Survey, released in January, indicated that standards for lending to businesses and consumers already have become more stringent.
Barron’s
March 13, 2023
In years with no recession but when S&P 500 earnings have been declining, the index gained 17% on average, according to Evercore data, with some years offering even better gains. In 1998, for instance, a year of high volatility, the index gained 27%. The midpoint of those moves, 22%, would land the S&P 500 at just over 4600 by year end. “A ‘Soft Landing’ playbook would suggest equity upside,” writes Julian Emanuel, chief equity and derivative strategist at Evercore.
Barron’s
March 13, 2023
Analysts expect S&P 500 free cash flow in aggregate to rise 10% year over year in 2023, according to FactSet. And if cash keeps flowing, and company payout ratios—the percent of profits companies pay to shareholders—remain the same, buybacks could end the year higher than last year. That could send buybacks closer to $1 trillion for the year, says Howard Silverblatt of S&P Global.
Barron’s
March 13, 2023
Moody’s Chief Economist Mark Zandi warned a Senate subcommittee that defaulting on the debt would trigger a recession, a loss of seven million jobs, and a financial crisis akin to 2008.
The Wall Street Journal, CNBC
March 12, 2023
Signature board member Barney Frank, the former congressman who formed one half of the landmark Dodd-Frank financial law after the 2008 financial crisis, said Signature suffered a bank run of billions of dollars on Friday. He said customer concern over Signature’s exposure to crypto spiraled after SVB’s collapse.
Reuters
March 10, 2023
A jump in demand for zero-day-to-expiration options has prompted clearinghouses and Wall Street firms to express concern about the risk of a sell-off, sources say. However, “many of the volatility-selling strategies we see in this market are in the form of spreads that limit the downside of the seller,” says Robert Knopp, co-head of Optiver’s S&P options desk.
WSJ
March 8, 2023
The boom in oil production that over the last decade made the U.S. the world’s largest producer is waning, suggesting the era of shale growth is nearing its peak. Frackers are hitting fewer big gushers in the Permian Basin, America’s busiest oil patch, the latest sign they have drained their catalog of good wells. Shale companies’ biggest and best wells are producing less oil.
Bloomberg
March 11, 2023
DoubleLine Capital’s Jeffrey Gundlach said he expects next week’s Federal Reserve meeting to mark the last rate hike for the year, adding that anything higher than a 25 basis-point rise could damage the central bank’s credibility. “I just think to save, kind of, the program and their credibility, they’ll probably raise rates 25 basis points. I would think that that would be the last increase.”