Stock Market Rally Ends as Banks Experience Selloff

　　

The stock market’s four-day rally came to a halt as banks experienced a selloff, which pulled down the Dow Jones Industrial Average by 0.6% and the S&P500 by 0.58% on Tuesday. This sudden dip in the market was mainly caused by a drop in major financial institutions such as Wells Fargo & Co. and Citigroup Inc., whose gauge fell by 2%. Even regional lenders like First Republic Bank and Zions Bancorporation didn’t fare well, declining by at least 4.8%.

In contrast to the banks, Treasury prices climbed higher as softer data on job openings led to increased bets that the Federal Reserve may soon conclude its tightening campaign. According to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), vacancies at US employers decreased to the lowest level since May 2021. This news caused yields on two-year Treasury notes to fall by 14 basis points to approximately 3.8%. Swap contracts referencing Fed meeting dates lowered the odds of a quarter-point rate hike in May to just under 50%, down from about 60%.

In his annual letter to shareholders, JPMorgan Chase & Co.’s CEO Jamie Dimon warned that the effects of the recent US banking crisis, which caused market turbulence last month, will be felt for years. This gloomy forecast could be one of the reasons why investors chose to sell off bank shares. However, this doesn’t necessarily mean that the overall market will continue to decline in the long run.

Seven out of eleven sectors in S&P500 stayed in the negative territory, as four sectors dropped more than 1% on Tuesday, and Industrials tumbled with 2.25% for the day. This could be due to the news of the banking crisis, as well as other economic uncertainties. Meanwhile, the Nasdaq 100 fell 0.4%, and MSCI world index edged lower with a 0.2% loss on Tuesday.

Main Pairs Movement

On Tuesday, the value of the U.S. dollar dropped to its lowest point in two months due to disappointing economic data. This has led to speculation that the Federal Reserve may be close to the end of its efforts to tighten the economy. Meanwhile, other central banks are expected to raise interest rates to address inflationary pressures.

The DXY index fell below 101.5 after the release of weak JOLTs (Job Openings and Labor Turnover Survey) and Factory Orders data for February. As a result, the EURUSD pair rose by 0.50% and reached a daily high of 1.0973. The GBPUSD pair also climbed to its highest level since June, closing with a 0.70% gain for the day.

Gold prices saw a significant increase, rising by 1.80% on Tuesday due to the weakness of the U.S. dollar. The XAU/USD pair continued to rise following the release of poor U.S. macroeconomic data and eased concerns about central banks resuming aggressive monetary tightening. The pair increased by almost 1.9% during the first half of the American trading session and closed at $2020 on Tuesday.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
NZD	RBNZ Interest Rate Decision	10:00	5.00%
NZD	RBNZ Rate Statement	10:00
GBP	Composite PMI (Mar)	16:30	52.2
GBP	Services PMI (Mar)	16:30	52.8
USD	ADP Nonfarm Employment Change (Mar)	20:15	200K
USD	ISM Non-Manufacturing PMI (Mar)	22:00	54.5
USD	Crude Oil Inventories	22:30	-1.800M