Investors in the S&P 500 (Index: SPX) couldn't catch a break during the trading week ending on 10 March 2023.

The index was first rocked on Tuesday, 7 March 2023 by by Federal Reserve Chair Jerome Powell's testimony signaling bigger rate hikes are coming. They were rocked again later in the week by news of the second largest bank failure in U.S. history.

For the week, the S&P 500 dropped a little over 4.5% to close out the week at 3861.59. The index is 19.5% below its record high close of 3 January 2022.

Investors' response to these events knocked the S&P 500's trajectory below the redzone forecast range on the latest update for the alternative futures chart.

At this time, it's premature to tell if the dividend futures-based model's multiplier has shifted again. The index' trajectory would need to remain persistently below the model's currently projected trajectories to make that call and, right now, investors are dealing with more questions than answers.

The biggest question investors are considering involves the risk of additional bank failures that may be triggered in response to the Fed's rate hikes. If new information verifies those risks are low, what we're seeing now is likely a short term noise event and we should see the S&P 500 rebound to the model's projected levels. If new information says otherwise, we may have to wait until after the dust clears to find out how the multiplier may have shifted.

Speaking of new information, here are the past week's market-moving headlines:

Monday, 6 March 2023

• Signs and portents for the U.S. economy:
• US factory orders fall as civilian aircraft demand dives
• NY Fed says supply chain pressures normalized in February
• Oil edges higher on supply tightness, China demand hopes
• Bank of America CEO sees U.S. technical recession in 3rd qtr
• Fed minions thinking they'd like to keep interest rates high for a while:
• Fed's Daly: tighter policy, for a longer time, 'likely' needed
• Bigger trouble, creepiness developing in China:
• China sets slightly lower annual GDP growth target - government report
• China's Xi urges private firms to 'be rich and loving' in pursuit of prosperity for all
• ECB minions thinking high inflation will continue, want more rate hikes, even though Eurozone economy is weaker than expected:
• ECB facing high core inflation in the near term, Lagarde says
• ECB's Lane backs more rate hikes even as inflation eases
• ECB's Holzmann calls for four more 50 bps rate hikes- Handelsblatt
• Euro zone retail sales weaker than expected in January
• S&P 500 ends slightly higher ahead of Powell testimony, upcoming data

Tuesday, 7 March 2023

• Signs and portents for the U.S. economy:
• Oil falls by $3/bbl as investors brace for steeper US rate hikes
• Odds of 50-basis-point Fed rate hike rise after Powell testimony
• Fed minions want to keep turning the screws:
• Hawkish Powell puts 50 bp Fed rate hikes back on table
• Fed's Powell sets the table for higher and possibly faster rate hikes
• Fed's Powell again rejects idea of raising inflation target
• Fed's Powell acknowledges slimmer corporate profits could help curb inflation
• Fed Chair Powell's testimony to Congress
• Bigger trouble developing in Japan and China:
• Japan's real wages drop at fastest pace since 2014 as hot inflation takes toll
• China Jan-Feb exports, imports slump again as global demand falters
• Central bank minions keep hiking rates, claim they're not happy about it:
• Australia central bank raises rates to more than decade high, tempers hawkishness
• Australia's central bank says closer to pausing on rate hikes
• After steep climb in rates, Latam central banks show no signs of reversal
• ECB minions claim Eurozone inflation is becoming less of a problem:
• ECB survey sees moderating inflation, rising wage expectations
• Wall Street falls more than 1% as Powell flags sharper rate hikes
• Wall St ends sharply lower, Treasury yield inversion widens after Powell remarks

Wednesday, 8 March 2023

• Signs and portents for the U.S. economy:
• Oil extends losses as rate hike concerns spur sell-off
• U.S. job openings fall less than expected; prior month's data revised higher
• Fed minion tries to walk back their rate hike mania:
• Fed still up in the air on whether to accelerate rate hikes, Powell says
• Fed's Powell: No call made yet on size of March rate rise
• Fed Chair Powell's testimony to Congress
• Instant View: Powell talks tough again, but says no call made on stepping up hikes
• Positive growth signs developing in the Eurozone after no growth to end 2022:
• German industrial output rises more than expected in January
• Euro zone economic growth trimmed to zero q/q at end of 2022
• Potential trouble developing in Canada as rate hikes take toll:
• Bank of Canada seen leaving rates unchanged as growth stalls
• BOJ minions expected to end part of never-ending stimulus:
• BOJ will end YCC in 2023 but tweak this week unlikely, economists say: Reuters Poll
• S&P 500 barely gains as investors eye upcoming jobs data, rate hikes

Thursday, 9 March 2023

• Signs and portents for the U.S. economy:
• U.S. job cuts over Jan-Feb hit highest since 2009 - report
• US weekly jobless claims post largest rise in 5 months; labor market still tight
• Fed minions coming to think inflation they allowed isn't so transitory, not so sure of policy direction:
• New York Fed model finds inflation pressures more persistent than thought
• Column-Fed's 'R-star' becomes black hole :Mike Dolan
• BOJ minions officially have a new boss:
• Japan's lower house approves Ueda as next BOJ chief
• Wall St falls on bank stocks tumble, jobs report jitters

Friday, 10 March 2023

• Signs and portents for the U.S. economy:
• Strong US job growth persists; wage inflation shows signs of slowdown
• Fed minions not sure of policy direction:
• Fed under less pressure to speed rate hikes as wage gains cool
• Bigger trouble developing in China, Eurozone:
• Analysis-China's debt-laden local governments pose challenges to economic growth, financial system
• Europe's banks sucked into global rout as high rates reality hits home
• BOJ minions keeping never-ending stimulus alive for now:
• BOJ keeps low rates as Kuroda sticks to script at swan song meeting
• 'Peter Pan' speech on deflation wasn't my idea, says BOJ's Kuroda, but it was right
• Wall St sinks on jitters about banks after mixed jobs report
• Wall Street 'fear gauge' options volume jumps to 4-year high as bank stocks sell off
• Silicon Valley Bank shut by California regulator
• Explainer-What caused Silicon Valley Bank's failure?
• Silicon Valley Bank dies but its disease lives on

The CME Group's FedWatch Tool shows an explosive change in expectations this week. While a quarter point rate hike appears still on tap for the Fed's 22 March (2023-Q1) meeting, that would be followed by a half point rate hike on 3 May (2023-Q2) to reach a target range of 5.25-5.50%. After that, the tool's projections of the Federal Funds Rate’s future goes somewhat haywire until 2024, when a quarter point rate cut appears on tap in March (2024-Q1).

On the GDP front, the Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 rose to +2.6% from last week’s +2.3% estimate.

Based on that last data point, you might think there would not be any bank failures taking place, yet here we are. Stay tuned!

Image credit: Photo by Usman Yousaf on Unsplash.