After a turbulent few weeks, calm appears to have been restored in the US financial markets.
Major indexes managed to eke out some gains after a tumultuous start to the month after signs that inflation is cooling off. The heat on bank stocks seems to have cooled down, as Washington sets its sights on Binance.
Here's the gist of what happened in the market this past week.
U.S. stocks ended March on a positive note after a turbulent start to the year heightened by bank runs, inflation, and interest rates.
Benchmark index S&P 500 ended the last trading day of the week 1.4% higher to close at 4109.31 points. The blue-chip index, Dow Jones Industrial Average closed up 415.12 points, or 1.3% higher, while tech-heavy Nasdaq finished 1.7% higher to post its best quarter since 2020.
Earlier in the month, the S&P 500 went negative for the year after the market went awry due to the bank run. This is a domino effect started by SVB which peaked with the acquisition of Credit Suisse by UBS, But as the bank crisis stabilized over the past two weeks, the indexes more than bounced back.
Political events usually have an impact on the stock market, but investors shrugged off the indictment of former US President Donald Trump in his alleged role in hush money payments to a former adult film star on the eve of the 2016 election.
Companies with ties to the former president saw their share price increase. One of such companies is Digital World Acquisition Corp., a blank check company that intends to merge with Trump Media and Technology Group gained 99 cents (7.6%) when the news of the indictment broke out.
Inflation appears to be cooling off, though its levels remain elevated.
Data from the core personal-consumption expenditures price index (CPI), showed that household expenditure increased 0.3% in February. This is lower than the 0.4% which analysts were expecting.
The latest CPI report was well received by investors as shown by the market moves in all major indexes which led US equities to finish the month and first quarter of the year on a positive note.
As the inflation figure begins to look promising, investors are betting that the Federal Reserve will lower its rate hikes by the end of the year.
Market pricing following the CPI report suggests that Wall Street believes that the Fed will maintain the interest rate at current levels and then start to reduce as early as July.
Unofficial projections released by the US central bank last week indicate that there will be perhaps one more increase this year and no reductions.
After a whipsaw session in recent weeks, bank stocks have staged a partial recovery.
Confidence in bank stocks began to seep back as regulators stepped in with emergency measures to protect depositors and offer banks more liquidity.
However, many bank stocks are still below where they were before the recent crisis. Bank of America Corp., Wells Fargo & Co., and PNC Financial Services Group Inc. all posted their worst monthly performance in three years.
Troubled lender First Republic Bank logged its largest quarterly drop on record, while Charles Schwab had its worst quarter since 2008.
The KBW Nasdaq bank index posted its worst month since March 2020 at the height of the Covid pandemic. The index plummeted 25% in March.
Chinese e-commerce giant Alibaba announced plans to split itself into six companies.
Each company will be run independently with its own CEOs and could seek separate IPOs. The announcement comes as co-founder Jack Ma resurfaced in China two years after China launched a crackdown on tech companies.
Alibaba’s restructuring culminates a years long shift inside the company to make it more nimble after Mr. Ma stepped back from the company’s helm in 2019 after building the business empire over two decades.
US bonds posted their largest quarterly drops since March 2020.
Yields on the 10-year Treasury closed the week at 3.491%. The 2-year yield posted its biggest monthly drop since 2008 after the short-term rate slid to 4.060%. Yields on US bonds have been volatile as interest-rate expectations have twisted and turned.
Oil prices ticked up. Brent crude futures rose 0.6% to $79.77 a barrel. Prices have fallen this quarter as Russian oil kept flowing and investors say a likely recession could curb fuel demand. But an Iraqi pipeline dispute could tighten global supplies if it isn’t resolved soon.
Binance was sued by US regulators over allegations that the world’s largest crypto exchange had illegally served American clients.
The Commodity Futures Trading Commission (CFTC) alleges that Binance hid substantial links to China for several years after the linchpin of the crypto world claimed that it had severed ties with the country following a clampdown on the industry in late 2017.
Binance has long claimed it serves no US customers. However internal documents and conversations retrieved from the phone of the exchange's chief executive Changpeng Zhao revealed that Zhao and other holding senior staff repeatedly instructed Binance employees to hide the company’s Chinese presence.
This included an office in use until at least the end of 2019, and one Chinese bank that was used to pay some employee salaries.
The CFTC says the exchange went to great lengths to indirectly source US customers, especially the big ones, the high-speed trading firms based in places such as Chicago and New York, by encouraging them to use virtual private networks and tools used to obscure the location of the user.
The CFTC is seeking a permanent injunction against Binance to stop it from ever working with US-based customers, even if the customer is trading through an offshore account.
The US derivatives regulator is also requesting that the linchpin of the crypto world hand over all benefits received, such as trading profits. The stakes are high.