Fed Attempts to Fight Inflation with Higher Rates, But Is It Possible?
The 10-year Treasury yield plummeted 29 basis points to 3.69% this week, while the 2-year Treasury yield fell 50 basis points to 4.9%. The U.S. 10-year Treasury yield (US10Y) fell 6 basis points to 3.58%, while the 2-year yield (US2Y) dropped 5 basis points to 4.17%. The yield on the benchmark 10-year U.S. Treasury note dropped to 3.4% Wednesday morning from 3.6% Tuesday.
The major stock indexes were heavily impacted by the downward trend.[0] The Dow Industrial Average dropped by over 500 points, constituting a 1.3% decrease; the S&P 500 and Nasdaq both dropped by around 1.5%.[1] First Republic Bank (FRC) fell more than 16% after the S&P Global downgraded the bank’s creditworthiness to BB+, or “junk” status.[2]
At 18:45 Eastern Time (22:45 Greenwich Mean Time), the Dow Jones, Nasdaq 100, and S&P 500 futures all decreased, with the Dow Jones and Nasdaq 100 futures dropping INDU futures decreased by 1.7%, SPX futures declined 1.8%, and NDX:IND futures dropped 1.6%.
The Producer Price Inflation Report for February, as issued by the Bureau of Labor Statistics, will be released.[3] It is anticipated that the month-to-month rise in wholesale prices will be 0.3%, which is slower than the 0.7% growth seen in January.[3] It is anticipated that the yearly rate will decrease from 6% to 5.4%.[3] It is anticipated that core Producer Price Index (PPI) will go up by 0.4% from the previous month, as compared to the 0.5% increase seen in January, and the yearly rate may have decreased from 5.[3]
The 10-year Treasury yield, 2-year Treasury yield, and major stock indexes all displayed a downward trend this week. This comes in the midst of the Fed attempting to fight inflation with higher rates, but it is already evident that it is not possible to do so.[4] With the Bureau of Labor Statistics expected to release their February producer price inflation report, many investors are wondering what the next steps for the Fed will be. Buckle up because more drastic measures may be needed to combat the current economic crisis.
0. “Credit Suisse, Citi and more bank stocks tumble amid Silicon Valley Bank turmoil” ABC News, 15 Mar. 2023, https://abcnews.go.com/Business/bank-stocks-tumble-amid-silicon-valley-bank-turmoil/story?id=97878825
1. “U.S. stocks drop on worries about Credit Suisse, global banking” NPR, 15 Mar. 2023, https://www.npr.org/2023/03/15/1163640413/credit-suiss-banks-silicon-valley-bank-signature-bank
2. “Regional and big bank stocks resume slide amid rising fears of banking crisis” MarketWatch, 15 Mar. 2023, https://www.marketwatch.com/story/regional-bank-stock-pare-early-gains-to-trade-lower-premarket-while-big-banks-follow-suit-d88caeab
3. “Nasdaq, S&P Futures Plunge As Credit Suisse Crisis Deepens, Bringing Banks Back In Spotlight – Invesco QQ” Benzinga, 15 Mar. 2023, https://www.benzinga.com/news/earnings/23/03/31356855/nasdaq-s-p-futures-plunge-as-credit-suisse-crisis-deepens-bringing-banks-back-in-spotlight
4. “Dow futures tick lower, CPI eases By Investing.com” Investing.com, 14 Mar. 2023, https://www.investing.com/news/stock-market-news/dow-futures-tick-lower-cpi-eases-3030616
