Summary
On March 27, 2023, the S&P 500 Index experienced a slight gain of 0.16%, while the Nasdaq 100 Index declined by 0.74%. The financial sector saw strong performance following First Citizens Bank’s acquisition of the troubled Silicon Valley Bank, indicating investor optimism about the deal. However, the overall market performance was mixed, with the Nasdaq showing a decline.
Market Overview
Concerns about a potential financial crisis in the United States emerged two weeks ago due to Silicon Valley Bank’s bankruptcy and issues with European banks. These concerns seem to have been overblown as the acquisition of Silicon Valley Bank by First Citizens Bank. It might signal a soft landing for the U.S. financial system. With the resolution of the “Silicon Valley Bank incident,” the Federal Reserve may consider raising interest rates again. Last week, Fed Chair Jerome Powell hinted at further rate hikes. Consequently, the U.S. 10-year Treasury yield has risen by over 10 basis points in the past week.
Sector Performance
Most of the 11 constituent industries in the S&P 500 Index advanced, led by energy (+2.10%), financials (+1.40%), industrials (+0.82%), and materials (+0.74%). On the other hand, communication services (-1.08%), information technology (-0.85%), and real estate (-0.36%) experienced declines.
Individual Stock Performance
Major U.S. tech stocks mostly declined, with Tesla rising 0.74% on Monday as its Berlin factory ramped up production to 5,000 vehicles per week. Meanwhile, Amazon fell 0.09%, Netflix dropped 0.22%, Intel declined 0.61%, NVIDIA slipped 0.93%, Apple fell 1.23%, AMD was down 1.37%, Microsoft declined 1.49%, Meta Platforms dropped 1.54%, and Google fell 2.83%.
Corporate News
Apple recently acquired WaveOne, a California-based AI algorithm company focusing on intelligent compression algorithms. Several WaveOne executives and employees have joined Apple to work on various machine learning projects. WaveOne’s technology selectively compresses less important background parts of videos, significantly reducing bandwidth requirements and network latency.
Macroeconomic Indicators
The Dallas Fed’s business activity index for March came in at -15.7. It was lower than the expected -10 and the previous reading of -13.5.
Key macroeconomic indicators to watch this week include the final reading of last year’s Q4 GDP and weekly jobless claims data to be released on Thursday, as well as February’s core PCE price index, personal consumption expenditures, and the University of Michigan’s consumer sentiment survey for March, set to be released on Friday.
Details of First Citizens Bank’s Acquisition of Silicon Valley Bank
First Citizens Bank’s stock price soared by 53% to $895.61 after acquiring nearly $72 billion worth of assets from Silicon Valley Bank for $16.5 billion. According to the agreement with the Federal Deposit Insurance Corporation (FDIC), the FDIC holds a $500 million common stock subscription right with an exercise price of $582.55. Notably, the FDIC also provided up to $70 billion in liquidity support tools for the transaction. It is an unusual level of credit support for First Citizens Bank’s absorption of Silicon Valley Bank. This move demonstrates the U.S. government’s urgent desire to resolve the banking crisis.
Conclusion
The mixed market performance on March 27, 2023, can be attributed to investor optimism regarding First Citizens Bank’s acquisition of Silicon Valley Bank and concerns about the possibility of further interest rate hikes by the Federal Reserve. As key macroeconomic indicators are set to be released this week, investors should closely monitor market trends and potential changes in the economic landscape.
