Suderman says: stronger jobs data, bank failure worries equity markets

Payroll numbers were stronger than expected and so bearish for rates, but rising unemployment and trimming wage gains were more encouraging. Tuesday’s CPI number now looks like a tie-breaker for rate hike doves and the hawks, both of which could take some ammunition from the jobs report to argue for rate moves. All eyes on Tuesday’s inflation report.

Stocks weaker on payroll data, rate hike fears

• Stocks were lower at mid-day, with the tech heavy Nasdaq and Banks leading the way down
• The VIX, Wall Street’s fear index, also significantly rose this morning, pushing above 25
• Equity markets are jittery in part over concerns of the health of the banking sector
• The US dollar tumbled further after yesterday's losses, trading near 104.4 at the time of writing
• Treasuries rebounded, with 2- and 10-year yields falling to 4.63%. and 3.71% respectively, suggesting that bonds anticipate rate hikes and weaker economic growth
• WTI oil saw over a 1% gains to $76.5

Silicon Valley Bank tanks

• Bank stocks were dragged down by concern's over the failure of SVB Financial (Silicon Valley Bank). SVB had $209 billion in total assets and $175 billion in total deposits at the end of 2022, and was exposed to the struggling tech sector
• The Federal Deposit Insurance Corporation, the US agency which safeguards depositors in commercial banks and savings banks, took over SVB and created a new bank, the Deposit Insurance National Bank of Santa Clara. Depositors interests were protected, being transferred over to the new bank
• US Banks stocks continued to fall, and the spillover also hit major European banks

Labor market data stronger (again)

• Markets focused on nonfarm payrolls, up 311,000 in February, ahead of the expected 215,000 and compared to a 504,000 advance in January (revised down from 517,000 this month)
• US payroll growth has now exceeded estimates for 11 straight months, the longest streak in at least 25 years
• US unemployment rate rose from 3.4% to 3.6% this month, against expectations for a steady figure, while average hourly earnings gains fell slightly month-over-month
• Tuesday’s Consumer Price Index could be critical, with forecasts that inflation will drop from 6.4% to 6.0% between January and February

Grain prices continue to fall

• It’s been mostly downhill for the grains since the middle of February – more so for the feed grains, lesser so for the soybean complex where a disastrous Argentine growing season is supporting beans and meal from falling too far
• High prices have done the job of ratcheting down corn demand, while optimism abounds from massive US acreage and production

China plays matchmaker, suggesting a new emerging global alignment

• China has been playing power broker in the Middle East, re-establishing diplomatic relations between Iran and Saudi Arabia, with a joint announcement coming from the three countries on Friday following four days of previously secret talks in Beijing
• The two Middle Eastern powers have long been at odds since 2106, and have backed opposing sides in proxy wars in Yemen, Syria, and elsewhere. Saudi Arabia has accused Iran of attacking oil facilities in the country as well as tankers in the gulfs separating the two, which Iran has denied
• Saudi Arabia, Iran and other countries are interested in joining the growing BRICS alliance (currently Brazil, Russia, India, China, South Africa) – this could be a sign of new alliances, and more trade being done outside of US influence