Stocks ended an extremely volatile week with small gains as the First Republic Bank bailout (FRC) of the 11 largest US lenders raised hopes that a widespread banking crisis will be averted; meanwhile, the problem in finances cemented the view that the Federal Reserve will not raise interest rates by more than 25bp.
Tech stocks led stocks higher with big gains as stock markets celebrated their limited exposure to the banking sector. It just goes to show that there is always actions that can buck the trend even in the most difficult markets; it is a good idea to evaluate them before making an investment decision.
This week we will see a series of very important economic reports and decisions published. It is worth keeping an eye on the following economic news, since all of them can become important market drivers. For a full list of all upcoming economic events, check out TipRanks Economic Calendar.
Federal Reserve interest rate – Wednesday, 3/22 – This week, we will finally know what the Federal Reserve’s interest rate decision will be; markets expect the US central bank to raise rates by between 0.25% and 5%, their highest level since the summer of 2007, before the housing crisis turned into a global financial crisis. While stock markets have already priced in a 25bp rate increase, a larger-than-expected increase will mean even more pressure on risky assets, including equities.
Durable Goods Order – Friday, 3/24 – On Friday, we will receive readings for Durable Goods Orders, which are expected to rise 0.9% from -4.5% in January. Durable goods orders reflect new orders placed with domestic manufacturers for the delivery of high-cost and durable manufactured goods such as machinery, equipment and vehicles. Durable goods orders are a key economic indicator for evaluating manufacturing activity in the short term; a higher reading would mean greater business confidence in the economy, which is positive for stocks.
Preliminary PMI reports for March – Friday, 3/24 – These reports are expected to steal the markets’ attention. Manufacturing PMI is forecast to rise a bit from February’s 43.7, still pointing to contraction; The Services PMI is expected to rise further from February’s 50.6, showing faster expansion in the services sector. PMIs are reports on economic activity in the manufacturing and service sectors, which serve as an important indicator of business conditions and the overall economic situation in the United States. Readings above 50 imply that activity in the sector is expanding, while a reading below 50 points to contraction and weighs negatively on the stock market.
