First Republic to Vanish. Fed to Hike Twice.

Tech sector earnings announcements again came to the rescue of the broader market. Right at the bell.

Again, after the initial relatively good Microsoft results, the New York session saw stocks extremely heavy all through the day. Even risking downward acceleration.

First Republic is a bank it would seem to soon be no more. As the Bank attempts all manner of rescue strategies it continues to slide relentlessly toward the open jaws of the FDIC. There are no easy answers for the bank. The stock collapsed a further 30% on the day.

It is a case of the incredible shrinking bank. Until, in the end, it likely just simply ceases to exist. Last moment buyers appear reluctant and may see value to act only after the FDIC has taken over. If any.

Continued geopolitical tensions also weighed in the market and it looked like another extremely troubling close when Meta announced its better than expected results. As we saw yesterday, the after market broadly rallied as a result. However it is unlikely these big tech stocks producing slightly better than the overall bearish expectations, are going to do any more than merely  generate brief bear market rallies.

Yes, the US equity market again appears to be in the grip of a significant bear market. The Federal Reserve will be hiking rates at its next meeting regardless of what happens with First Republic. They have shown before, that in an odd way they see continuing rate hikes in the midst of a banking crisis as supposedly reassuring to markets?

The Federal Reserve will be hiking this next meeting. The recent pullback in oil prices may be just enough to keep monthly inflation flatfish. Services sector inflation remains a real threat however. It may be the case that at the following meeting there is indeed increased debate about whether to raise rates the second time from now, but they will nevertheless go ahead. The view here is that there are at least two more rate hikes to come. More if Oil were to surge again.

The only really good news on the day, was that US Durable Goods Orders rose reasonably strongly. As with a lot of data lately however, there was something else entirely going on.

US Durable Goods Orders rose 3.2% in March. Sounds great! The only problem is that civilian aircraft orders were up 78% and this is what shifted the needle to positive. Orders for non-defense capital goods excluding aircraft were actually down 0.4%. Following a 0.7% decline in February.

Not quite the picture that first appears with a simple headline approach. What is going on in the real economy of the USA, is depicted in trend terms of the data flows. Monthly statistical variances have been on the rise as the economy increasingly moves in fits and starts.

Overall US data remains highly problematic for the bulls.

With a large bank about to disappear and the Fed to hike anyway, this very fresh new bear market may last quite a while.

Clifford BennettACY Securities Chief Economist

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