The Swiss government gets an “A” for its speed in addressing the Credit Suisse problem, but it doesn’t resolve the U.S. banking crisis. The question of whether the government should (or Congress has the will) to insure every deposit in the U.S. is still very much in the air. The primary focus for U.S. markets is on the Federal Reserve meeting this week. Here in the U.S., the markets can’t seem to agree on what the Fed should be focused on: fighting inflation or avoiding a credit-induced recession. The markets have rarely seen such a wide weekly dispersion in sector performance. Major sectors last week : Technology up 5.7% Energy down 7.0% Materials down 3.5% Industrials down 2.5% Banks down 12% Technology up 5.7% But banks down 12%? That just doesn’t happen, not on a weekly basis. And the decline in cyclical sectors like materials and industrials is also strange. The decline in cyclicals looks like some traders are betting on an economic slowdown. But what about the tech rally? Two things account for why some big tech stocks are up 10% or more last week: 1) the drop in bond yields is a big plus for tech stocks, and 2) tech bulls are expecting a “dovish hike,” from the Fed, that is, it will hike 25 basis points but then signal a pause. Why a pause? The banking crisis has tightened financial conditions because it has dramatically interrupted the flow of capital. Banks, particularly regional banks, will likely be doing much less lending for the rest of the year. Many on Wall Street tech believe that the Fed will acknowledge progress on inflation, and that a pause may be warranted due to what is happening in the banking system. “We expect the FOMC to pause at its March meeting this week because of stress in the banking system,” Jan Hatzius from Goldman Sachs said in a note to clients. “[Silicon Valley Bank] and the rest just may have done the Fed’s job for it,” Frank Gretz at Wellington Shields told clients on Friday. “At the very least, it should help ease the…
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