Friday's Markets Update (March 10, 2023)
On Friday SVB happened which was not at all surprising from the macroeconomic point of view. All banks, especially SMEs, have been highly leveraged since at least the year 2010. As a result, they are burdened by enormous debts which, thanks to Powell, they must now service by paying historically record-high rates. However, they are unable to do so because their clients - companies, especially those in the high-tech industry, to which these small banks have lent money - are experiencing a shortage of revenue due to the artificially triggered recession in the economy.
Powell's incompetent and politically motivated decision to raise the rates at a record speed has added to this issue. The banks and companies do not have enough time to rearrange their businesses and renegotiate their debts. The situation is compounded by crashing markets, which drag down the banks' stocks that serve as collateral for loans.
It appears that many traders did not factor this into their trading plans when they wholeheartedly joined the January rally. As a result, indexes reacted by plunging below their 200-day moving averages. The NASDAQ dropped by 1.7 percent (open: 11325, close: 11138), and BTC entered its 20K resistance zone (open: 20184, close: 11969), setting the Fear and Greed Index at 34.
Other macroeconomic news includes nonfarm payroll employment rising by 311K in February, while, confusingly, the unemployment rate edged up to 3.6 percent from 3.4 percent in the previous month. Job gains were seen in leisure, retail, and government sectors (who would have doubted that?), while employment declined in information, telecommunications, transportation, and warehousing sectors.