The Rise of Regional Banks Takes a Breathe

A deposit slot outside Western Union Bank headquarters in Phoenix, Arizona, U.S., Monday, March 13, 2023.

Caitlin O’Hara | Bloomberg | Getty Images

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The rise of regional banks prevented a larger collapse in the banking sector.

what you need to know today

  • Traders appeared to disagree with the ratings firms, as did Schwab’s chief executive. Walter Bettinger told CNBC people are still depositing money into his bank And, walking the talk, revealed he bought 50,000 shares for his personal account on Tuesday.
  • Prices of goods and services in February Up 0.4% for the month – According to the Consumer Price Index, the annual inflation rate is 6%. The estimates for both readings were correct.
  • meta will 10,000 layoffs, the company announced Tuesday. It also closed 5,000 unfilled recruitment positions. Just four months ago, Meta cut 11,000 jobs. The company is fulfilling its own “Efficiency year“It does — if efficiency is measured purely in terms of layoffs. Investors like what they hear: Shares up 7.25%.
  • Professional Edition Silicon Valley Bank collapsed due to high interest rates. Other companies may soon face difficulties.but these three stocks Resilient in a high interest rate environment, analysts say.

the bottom line

How important are banks? So important that the CPI — the most watched and most anticipated economic data of the past year — seemed like little more than background noise yesterday.

Of course, the lackluster reaction to the CPI could be because the numbers are exactly in line with estimates. After days of turmoil following the collapse of Silicon Valley banks, what the market needs is the unsurprising. Excluding volatile food and energy prices, the core CPI rose 5.5% in 12 months. That said, prices are still rising uncomfortably, but at a slower rate than in previous months.

The bigger story of the day was how banks — and investors — were reacting to measures by U.S. financial regulators to protect the financial sector. The SPDR S&P Regional Bank ETF rose 2%. Monday’s biggest losers tried to recover lost ground on Tuesday — and if they didn’t quite make it up, they at least stopped the slide. First Republic Bank was up 26.98%, Western Alliance Bancorp was up 14.36% and Keycorp was up 6.95%.

More importantly, the major stock indexes rebounded. The Dow Jones Industrial Average snapped a five-day losing streak with a 1.06% gain, the S&P 500 rose 1.65% and the Nasdaq Composite rose 2.14%.

“Given the CPI didn’t have any major surprises and the banking sector didn’t have any surprises overnight, we’re calling it a relief rally,” said Adam Turnquist, chief technical strategist at LPL Financial. “The market welcomed that.”

We hope the Fed will not surprise at next week’s meeting either.

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