There is something else to worry about for Wall Street

The US Consumer Credit Crisis and Implications for Inflationary Rates and Interest Rate Increases in the Next Few Years, according to the Fed of New York

According to the Federal Reserve Bank of New York, consumers in the US are starting to feel that credit is harder to come by.

Fears of a credit crisis erupted in March after Silicon Valley Bank’s collapse. While action taken by the Federal Reserve and the Treasury Department appears to have allayed concerns of further collapses, economists anticipate that a further tightening of credit standards may follow, further pressuring businesses and consumers in this environment of high interest rates and moderating inflation.

Looking beyond inflation, consumers’ expectations of higher unemployment increased by 1.3 percentage point to 40.7%, driven by consumers between the ages of 40 and 60 years old and those with household incomes between $50,000 and $100,000 a year.

Even with the banking sector still on edge after two big bank failures, persistent inflation remains the Fed’s top concern. This week’s Consumer Price Index, due to be announced Wednesday at 8:30 am ET, could determine whether the central bank raises rates again in May.

Premarket Stocks Traverse the Consumer Price Index, Banks, and the First-Federal-Employment Season

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The chief financial analyst at Bankrate said inflation is relevant because it has been for the past two years. “The Consumer Price Index remains the most-watched monthly economic report.”

Last month’s reading showed an increase in prices between January and February, which doesn’t “inspire confidence that 2% is just around the corner,” said McBride.

For March, economists forecast a 0.4% monthly increase in the CPI, which matches the September – February average and would keep those year-over-year averages high.

Greg Bassuk, CEO at AXS Investments, said that there is the chance of another Fed rate hike in May. That’s notwithstanding the slowing economy “that has been weighed down even more heavily by the banking system debacle,” he added.

What it means for markets: Between inflation data and the start to the first-quarter corporate earnings season (three of the largest US banks, JPMorgan Chase, Wells Fargo and Citigroup report this Friday), this week is set up for heightened stock volatility, said Terry Sandven, chief equity strategist at US Bank Wealth Management.

“Persistent inflation, rising interest rates and uncertainty over the pace of earnings growth in 2023 remain headwinds to advancing equity prices. Each will be in focus this week,” he said.

The report found that retail traders continued to be net buyers of equities in March. Main Street traders are buying the majority of new stock in the US.

The increasing power of the retail investor – fueled by stimulus cash, easier access to trading platforms and more market education amongst other things, has been an ongoing trend since the beginning of the pandemic. Lately, large companies have begun to change their investor relations strategies to become more retail investor friendly. Now even the ‘smart money’ traders are using Reddit for stock tips.

So where are they investing? The Financial sector has the greatest buying interest. In March there were catalysts such as the collapse of Silicon Valley Bank and the emergency sale of Credit Suisse.

Source: https://www.cnn.com/2023/04/11/investing/premarket-stocks-trading/index.html

Survey of the US Labor Market – Implications for the Recovery of the American Unemployment Rate in the First Half of the 20th Century

The survey results show that people were more bearish on the US labor market than in the previous months. The New York Fed found that the probability that the US unemployment rate will go up one year from now increased by 1.3 percentage points.