The US stock market had a volatile week, impacted by the Federal Reserve’s interest rate decision and pressure on the banking sector, but ended on a positive note with stocks bouncing back from earlier losses.
On Friday, the US stock market ended the week in positive territory, after a turbulent week that saw early losses due to the Federal Reserve’s interest rate decision and continued pressure on the banking sector. The Federal Reserve increased rates by 25 basis points on Wednesday, earlier this week, setting the range for the fed funds rate at 4.75%-5%, the highest since October 2007. Furthermore, the Fed indicated that their aggressive campaign to raise rates and control inflation was coming to a close.
According to the Fed’s policy statement, “The Committee foresees that it may be necessary to implement some further measures to make monetary policy sufficiently restrictive and bring inflation back to 2% gradually”. Jerome Powell, Chair of the Federal Reserve of the United States remained consistent with the Fed’s position that it is possible to achieve a soft landing or bring inflation back to target without causing a recession in the economy.
US Stock Market’s Response
In response, the S&P 500 initially fell by 1% in early Friday trading, the most significant drop in a week, but later recovered to close up 0.57%. Similarly, the Dow Jones Industrial Average and the Nasdaq Composite also ended the week up by 0.4% and 0.3%, respectively, after initially experiencing losses.
WTI crude oil fell by 3% in earlier trading, but it later recovered to settle at $69.20 a barrel, which is still one of the lowest levels in nearly two years. Brent crude also dipped by 1% to settle at approximately $75 a barrel. The Energy Secretary, Jennifer Granholm, had told lawmakers on Thursday that it would be challenging to utilize the current decline in oil prices, and refilling the country’s Strategic Petroleum Reserve (SPR) may take several years.
The US government bond yields also pared losses, with the benchmark 10-year Treasury yield falling about 70 basis points to trade near 3.38%.
Banking Stock Response
On Friday, bank sentiment was uncertain due to investor worries about financial stability that have been heightened by the unexpected failure of Silicon Valley Bank, causing a ripple effect throughout the entire financial system.
The stocks of major banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS) ended the day with losses, while Bank of America (BAC) managed to recover from earlier losses and closed the day unchange. During midday trading, regional bank stocks such as PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), and Regions Financial (RF) rebounded and sustained their positive trend until the end of the trading session, after experiencing more significant declines earlier in the day. The stocks of European bank operators Deutsche Bank (DB) and UBS (UBS) closed about 3% and 1% lower, respectively, reflecting the persisting impact of Credit Suisse’s collapse on Euro banks.
Overall, the week was bumpy for the US stock market, which experienced fluctuations due to the Federal Reserve’s interest rate decision and continued pressure on the banking sector. Nevertheless, it ended on a positive note with stocks recovering from their earlier losses
