SVB Collapse, CPI and other Key Themes to Watch this Week

Markets took it on the chin last week with the S&P 500 ($SPX) (SPY) closing down nearly 5%! Large slides also occurred in some other highly liquid names, Tesla (TSLA) for one was down 12.3% by the close on Friday and even the market stalwart Apple (AAPL) was lower this week.

Contradictory to the selloff on Friday, the US economy added 311,000 jobs in the Non-Farm Payroll release. It is possible that the NFP number was a catalyst for the sell-off, especially coupled with Powell's statements Tuesday and Wednesday about more rate increases being needed to cool off the economy. 

The Dow Jones Industrials Index ($DOWI) (DIA) was up +4.15% for the week while the Nasdaq 100 Index ($IUXX) (QQQ) was +8.84% higher.

In addition to the usual news releases, there are a few other things of note happening that could affect the market this week: mainly the Silicon Valley Bank (SIVB) and Silvergate Capital (SI) catastrophe.

Here is the full list of the top 5 themes to watch in the market this week

SVB (Silicon Valley Bank)

The SVB collapse was the largest bank seizure since Washington Mutual in the great financial crisis. Regulators took control of the bank at the end of last week and plan to reopen at the beginning of this week to allow FDIC-insured accounts to start withdrawals. Any account over the insured amount of 250K will receive receivership certificates and will need to follow the process to recover some or all of their funds. This created some serious waves in the market as fear started to spread about the bank's insolvency. Stocks started to fall as the fear spread out to the general market, and this could be something to keep an eye on in the coming week(s) as we all see how this continues to unfold and if the collapse materially impacts any of the companies that did business with SVB. 

Silvergate

SIlvergate announced last week that it will be shutting down and liquidating all assets. This has the potential to be huge news because this is one of two main lenders to crypto companies and there are several publicly traded companies like Coinbase that use Silvergate’s core services. 

They have assured everyone that all deposit-related funds will be returned and are safe, but it was not enough of a reassurance not to spook the market a bit. This looks to have been hitting the crypto markets harder than the equities markets, but the two seem to be at least correlated as of late so this is worth keeping an eye on.   

CPI

It’s that time of Month again, CPI! On the back of a strong NFP last week and some additional hawkish statements from Powell at the senate hearing, CPI has the potential to really start some fireworks. If it comes in hotter than expected Tuesday morning at 8:30am est, it's possible that the sell-off that happened at the end of last week will grow some legs. A cooler-than-expected number could be a cause for positive movement in the markets. These thoughts are also dependent on some other macro factors like the Silvergate and SVB issues mentioned above and any remarks by the Fed.

PPI

In a similar vein to the CPI on Tuesday is the PPI on Wednesday. If this grows at a higher-than-expected rate it will mean that producers are paying more for goods and services and will likely be passing those costs on to the consumer. This would be another negative sign of inflation creeping back up. If this comes in hot it's possible we see negative reactions from the markets and if it comes in cooler than expected a rally could be possible on the news. Similar to CPI, this thesis is dependent on some of the Macro forces at play in the economy. 

Unemployment Claims

Last week Non-farm came in higher than expected, based on that it could be speculated that unemployment would fall. This could be important given the rhetoric of the Fed in last week's Senate hearings. Anything showing the strength of the economy could be viewed as bad. We are still in a Bad news is good news paradigm in so far as inflation is concerned. 

Best of luck this week and don’t forget to check out my daily options article.

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