Stocks Rise Monday Ahead of Bank Probes, PCE Report

Stocks mostly rose Monday as bank shares rallied and tech shares endured selling as investors reassessed following last week’s rally.

Investors will continue to monitor the banking situation this week as congressional committees in the Senate and House take turns probing recent bank failures.

Meanwhile, the consumer confidence report will be the first since the banking crisis began, and the latest PCE report will give us the latest insight into the state of inflation.

Probe

The Senate Banking Committee will begin its probe into the events that led to the collapse of Silicon Valley Bank and Signature bank on Tuesday, while the House Financial Services Committee will have its turn Wednesday.

While executives from the failed banks will be absent, despite being asked to testify this week or at a later date, there will be notable members from the FDIC, Treasury, and Federal Reserve.

Martin J. Gruengerg, chair of the FDIC; Michael Barr, the vice chair for supervision at the Federal Reserve; and Nellie Liang, the undersecretary for domestic finance at the Treasury Department will all be present.

There are several categories to watch, including increased oversight of the Fed, which has bipartisan support from Senator Warren and Senator Rick Scott to form a Senate-confirmed watchdog.

Meanwhile, deregulation in 2018 of parts of the Dodd-Frank law that had some bipartisan support and FDIC insurance limits are also expected to be main topics.

Inflation

The February PCE report, due Friday morning, is expected to show prices rose at a slower pace.

Both headline and core prices are expected to have risen 0.4% following their respective 0.6% advances in January.

Meanwhile, personal spending is expected to cool to a monthly rise of 0.3% following a 1.8% surge in January. Personal income is also projected to rise 0.3%, a deceleration from 0.6%.

This should be a pretty big report as it will be the first inflation reading since last week’s rate hike and updated projections.

While investors weren’t overly certain how the Fed would proceed given the banking crisis, with some calling for a wait-and-see strategy and others assuming a hike was imminent.

Ultimately, they proceeded with a quarter point rate hike and Powell spent much of the Q&A time trying to reassure everyone that the banking industry is “sound and resilient”.

So what would be a good report? Downside everything, as that would suggest to the Fed that restrictive policy is permeating into the economy. No banks failed in February, so it would be a preamble of what to expect when March reports start coming out as crises tend to get people spending more conservatively.

Confidence

The Consumer Confidence report for March is expected to fall to a reading of 101.5 from 102.9.

The decline is entirely driven by the expectations index as the present situations index rose.

The expectations index will be interesting as readings below 80 often signal a recession in the next year. That index plunged from 76.0 to 69.7 in February. The report noted that people’s outlook is cutting into their plans to buy homes, autos, and major appliances. Additionally, vacation intentions fell, which spelled trouble for some of the hardest hit sectors during the pandemic, such as air and cruise lines.