Stocks susceptible to a ‘potentially intense’ March pullback, says AXS Investments’ Bassuk
Stocks look “increasingly susceptible to a potentially intense” pullback in March, unless economic data weakens, corporate earnings show more consistent strength and geopolitical tensions start to calm (as with Russia and China), according to Greg Bassuk, CEO at AXS Investments.
“With market volatility likely to persist in March as investors digest the pending release of new economic, corporate and geopolitical data and developments, investors would be prudent to brace for a near-term market rollercoaster as both Wall Street and Main Street process and position for the months ahead,” he said.
Economic data remains the investor narrative for March with all eyes laser focused on February’s inflation print.
“Just as the February sell-off was sparked by the strong January jobs report and a multitude of robust growth and inflation readings, Wall Street and Main Street eagerly await upcoming economic data to decipher the trajectory of the job market and inflation to gauge the likely actions of the Fed in March and throughout 2023,” he added.
— Tanaya Macheel
Stocks chop lower as 10-year yield pushes above 4%
The 10-year Treasury yield took another run at 4%, as stocks chopped lower in afternoon trading.
The 10-year was at 4.004% in mid-afternoon. The 10-year yield breached 4% for the first time since Nov. 10 in late morning trading, but backed off below that level temporarily. Yields move opposite price.
Traders have been watching the negative correlation between stocks and the benchmark 10-year’s move to the key 4% psychological level. Chart strategists say the level is not important resistance, but it is important in terms of the impact on investor sentiment.
Tech and growth stocks are particularly sensitive to moves in the 10-year yield. The Technology Select Sector SPDR Fund, which repesents the tech names in the S&P 500, was off 0.8%.
Bond strategists expect the 10-year yield to continue to rise, ahead of the Fed’s March 22 rate decision. Any strong inflation or even jobs data could be a catalyst for a move higher.
Michael Schumacher of Wells Fargo said the 10-year could easily reach 4.20% in the near term.
Fed’s Kashkari open to higher rate hike at March meeting
Minneapolis Federal Reserve President Neel Kashkari said Wednesday that he’s open to the possibility of a larger interest rate increase at this month’s policy meeting, but hasn’t made up his mind yet.
“I’m open-minded at this point about whether it’s 25 or 50 basis points,” the central bank official said during an event in his home district.
A voting member on the rate-setting Federal Open Market Committee, Kashkari said the “dot plot” of individual members’ future expectations will be more significant than what’s decided at the March 21-22 meeting.
He noted that his “dot” was higher than most of the other FOMC members at the last meeting, when the committee stepped back the level of previous hikes to a quarter-point move. Kashkari indicated the he again is likely to tilt to the hawkish side in view of recent data that shows inflation remains high despite all the rate increases over the past year.
“At this point I have not decided what my dot is going to look like, but I lean towards continuing to raise further. I would continue to push up my policy path,” he said.