Chairman Powell Holds the Line 

Despite the most intense banking crisis since 2008, Jerome Powell and the Federal Open Market Committee once again increased the federal funds rate 25 basis points to a target of 4.75% to 5.00%. The recent financial turmoil may also spell an end to its rate-rise campaign sooner than traders had expected less than a month ago, according to interest rate futures. Nearly 70% of investors now believe that rates will actually fall to between 4.25% and 4.5% by the end of the year, up from 57% just before the announcement. The Federal Reserve’s median terminal rate target has returned to the 5% to 5.25% level, which is where it was in December. Put simply, investors deduce that the recent banking turmoil has reduced the Fed’s impetus to raise rates much higher. Prior to the recent collapse of Silicon Valley Bank and Signature Bank, the Federal Reserve was weighing a half-point hike in order to throw even more cold water on a still warm economy.  

But while slower and lower interest rate increases should please equity markets, major stock indexes, including the Dow Jones, S&P 500 and Nasdaq, were all sharply lower after the decision yesterday. Market participants are obviously still concerned about contagion in the banking sector and sticky inflation plaguing consumers and corporate America. The latest data on inflation is due out next week — economists expect inflation to remain unchanged in February from the previous month. 

Three Things                                               

Home Sales Drop for First Time in 11 Years 

While existing home sales did increase 14.5% per month in February from the month prior, year-over-year sales plummeted 22.6% (seasonally adjusted) in the latest data from the National Association of Realtors. The milestone marks the first time that the median home value dropped year-over-year since February 2012. It’s important to note that home prices had also been declining for 12 months straight through the month of January. The biggest percentage decreases in prices were seen in homes valued at $1 million+. And while mortgage rates are off their highs made last fall, consumers have new concerns around banks’ stability, following several high-profile failures and takeovers. Spring is typically the busiest season for real estate, but the outlook remains cautious. 

Moderna Sets High Commercial Price for Vaccine 

Despite the end of lockdowns, America remains in a state of emergency until May. During the COVID-19 pandemic, U.S. government-funded research helped bring several vaccines to market in record time. Drugmakers such as Pfizer, Johnson & Johnson, and Moderna sold those vaccines, in bulk to the government, which were then distributed, largely at no cost, to millions of patients. Moderna sold its vaccine to the government at prices between $15 and $26 per dose, but now that the pandemic is ending, it has decided to set the commercial price of the vaccine at a pricey $130 per dose. Pfizer Inc. and its partner BioNTech SE are reportedly planning similar pricing. Those with insurance are expected to pay nothing out of pocket and Moderna says it will launch a patient assistance program for the un- or underinsured.  

Bitcoin to Markets: Remember Me? 

Even before the collapse of crypto exchange FTX in November, best-in-breed Bitcoin, along with the myriad of its less-esteemed peers were brushed aside by many investors. Prices of the most popular cryptos had languished since last summer, but some have seen meteoric gains as the recent banking crisis reinvigorated the group. Cryptos such as Bitcoin were intended to create an alternative to the complicated, yet fragile banking system and its inherent risks — unfortunately, we’ve seen that these digital currencies have their own perils. But for the moment, Bitcoin, the world’s largest cryptocurrency, is surging. It has jumped 21% in March alone, bringing the currency’s rally to almost 70% so far this year. 

In the Know                                               

Monetizing the End of Credit Suisse  

It’s been just days since UBS agreed to spend a paltry $3.25 billion to “rescue” its rival Credit Suisse. If and when the deal is completed, the new entity will be the fourth-largest bank (by assets) and the second-largest private bank (wealth manager) globally. But it’s not just the deal that’s making news … within hours of the takeover announcement, a flood of memorabilia, from Credit Suisse stamped gold bars to “CS” branded stamps, sports bags, ski hats and more, hit the market at ultra-high prices. It’s still unclear whether the brand will remain once the smoke clears.