Stocks End Mixed, Feds Backstop Depositors At Shuttered Banks  Image: Bigstock Stocks closed mostly lower yesterday, but well off their worst levels of the day after the government unveiled plans to backstop bank depositors. Bank stocks opened sharply lower. And while they too closed off their worst levels of the day, many still finished with sharp losses, including First Republic, which was down -61%; Western Alliance Bancorp, which was down -47%; and PacWest, which down -21%, to name a few. Worries over regional contagion for smaller and mid-sized banks weighed on those names and more. While the government said they would make depositors whole at Silicon Valley Bank, and Signature Bank, they made it clear they would not be coming to the rescue of the bank's shareholders. So plenty of investors likely sold their holdings in those companies just in case. Tech stocks fared better yesterday than Friday. Same goes for biotechs. They both got slammed on Friday. Since SVB was a large financier of tech and health care startups, there was concern what that would mean to those industries. But, aside from venture-backed companies, other reports suggested that small and mid-cap biotech companies had little exposure to SVB. So the rebound yesterday made sense. (It also didn't hurt that Pfizer offered to buy biotech company Seagen.) While all the focus has been on the banking industry over the last few days, everybody will turn their attention back to inflation (and interest rates) this morning when the Consumer Price Index (CPI) is released.
Last month's report confirmed inflation was still moderating. But that moderation slowed, and came in a little hotter than expected. For the month, headline inflation was up 0.5% vs. the consensus for 0.4%. On a y/y basis, it was up 6.4% vs. views for 6.2%. The core rate (ex-food & energy) was up 0.4% m/m vs. the consensus for 0.3%, and the y/y rate was up 5.6% vs. views for 5.5%. Today's report is expected to show headline inflation up 0.4% m/m, and a 6.0% y/y. The core rate is expected to be up 0.4% m/m, and 5.5% y/y. That report comes out at 8:30 AM ET. If inflation drops more than expected, we could very well see a sharp rebound. Although, given that we'll get another inflation report tomorrow with the Producer Price Index (PPI), traders may not want to get too carried away. Nonetheless , a lower that expected number could be met with strong buying, while a hotter than expected report could prompt more selling. By this time next week, we'll hear what the Fed does on rates. Speculation that the Fed would raise by 50 basis points has gone down after last week's bank implosion. The expectation is for 25 basis points. But some are even calling for the Fed to pause. I highly doubt it. But you never know. An analyst at Goldman Sachs said he is no longer expecting the Fed to raise rates at the next meeting on March 21-22. We shall see. But the Fed has repeatedly said their decision is data dependent. So all eyes will be on this morning's CPI report. And of course, the fallout from the current banking crisis as well. Should be a busy day. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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