Weekly Market & Economic News Recap (Week of March 6, 2023)

• The American manufacturing sector is starting to show signs of weakness after two years of strong growth, as higher interest rates and a slowdown in exports threaten production. New orders for manufactured goods contracted for the sixth straight month through February, according to surveys by the Institute for Supply Management. Manufacturing output is down 1.7% from its post pandemic peak in May 2022, according to a three-month moving average of Federal Reserve data. And the Commerce Department’s measure of civilian capital equipment orders, excluding aircraft—the building blocks of business—was down 3.4% in January from its recent high in November 2021, after adjusting for inflation. (Wall Street Journal, March 6, 2023, https://www.wsj.com/articles/feds-rate-moves-put-manufacturing-sector-at-risk-da82b85b?mod=economy_more_pos14)

• Federal Reserve Chair Jerome Powell said Wednesday officials were keeping their options open over how much to raise interest rates this month after investors interpreted his comments Tuesday to suggest a half-percentage-point increase was likely. His comments over two days of congressional hearings show how the central bank is contemplating a shift in tactics to keep up with an economy showing surprising strength after a year of rate increases. (Wall Street Journal, March 8, 2023, https://www.wsj.com/articles/fed-chair-jerome-powell-returns-to-congress-for-second-day-of-hearings-e58457f7?mod=economy_more_pos5)

• U.S. trade with the rest of the world grew in January, adding to signs the global economy started the year on a surprisingly strong note. Imports grew 3.0% to a seasonally adjusted $325.8 billion, reflecting increases in the shipments of automobiles and consumer goods such as cellphones, toys and sporting goods, the Commerce Department said Wednesday. Exports rose 3.4% to $257.5 billion, as the sale of pharmaceutical drugs and other consumer goods increased. Trade data isn’t adjusted for inflation. (Wall Street Journal, March 8, 2023, https://www.wsj.com/articles/u-s-imports-exports-grew-in-january-adding-to-signs-of-solid-global-economy-dc3cd39f?mod=economy_more_pos7)

• Investors and depositors tried to pull $42 billion from Silicon Valley Bank on Thursday in one of the biggest US bank runs in more than a decade, according to a Friday regulatory filing. At the close of business on March 9, the bank had a negative cash balance of $958 million, according to an order taking possession of the bank filed Friday by California’s bank regulator, the Department of Financial Protection and Innovation. (Bloomberg, March 10, 2023, https://www.bloomberg.com/news/articles/2023-03-11/svb-depositors-investors-tried-to-pull-42-billion-on-thursday?srnd=markets-vp)

• The Biden administration on Friday reacted to the largest failure by a US lender in more than a decade, offering its assurance that the US financial system would weather fallout from the collapse of Silicon Valley Bank and that regulators were closely monitoring developments. Treasury Secretary Janet Yellen said she had “full confidence in banking regulators to take appropriate actions in response,” adding that regulators “have effective tools” to address the situation. (Bloomberg, March 10, 2023, https://www.bloomberg.com/news/articles/2023-03-10/yellen-says-us-bank-system-resilient-amid-svb-fallout-concern?srnd=markets-vp)

• Robust hiring in February added to recent evidence the economy got off to a strong start this year, despite rising interest rates aimed at slowing growth and high inflation. Employers added a seasonally adjusted 311,000 jobs last month, a cooler but still strong increase following a revised 504,000 gain in January, the Labor Department reported Friday. The unemployment rate rose to 3.6% last month from January’s 3.4% as more people sought work. (Wall Street Journal, March 10, 2023, https://www.wsj.com/articles/february-jobs-report-unemployment-rate-economy-growth-2023-e4b1d318?mod=economy_lead_story)

• Stocks tumbled as investors ran for safe havens on Friday, unnerved by concerns about the health of the U.S. financial system and a still-strong jobs report. The selloff deepened after regulators shut down Silicon Valley Bank, marking the largest bank failure in the U.S. since 2008. Bond yields tumbled. The S&P 500 closed down 56.73 points, or 1.4%, at 3861.59, while the blue-chip Dow Jones Industrial Average fell 345.22 points, or 1.1%, to 31909.64. The Nasdaq Composite lost 199.47 points, or 1.8%, to close at 11138.89. Investor sentiment has broadly soured in recent days, with the S&P 500 finishing down nearly 5% on the week. (Wall Street Journal, March 10, 2023, https://www.wsj.com/articles/global-stocks-markets-dow-update-03-10-2023-f8465871?mod=markets_major_pos10)

• The export engine that propelled China’s recovery through much of the pandemic sputtered to start the year, complicating Beijing’s efforts to juice an economy that is still reeling from three years of stringent “zero-Covid” restrictions. Exports from the world’s second largest economy fell 6.8% during the first two months of 2023 from a year earlier, extending a string of year-over-year declines stretching back to October, data from China’s customs bureau showed Tuesday. (Wall Street Journal, March 7, 2023, https://www.wsj.com/articles/chinese-exports-pull-back-again-hampering-post-covid-recovery-185c3f21?mod=economy_more_pos11)