Next week’s crucial inflation data will test a US stock market already gripped by concerns over the Federal Reserve’s hawkishness and the potential consequences from the largest bank failure since the financial crisis.
The mixed US jobs report on Friday alleviated some concerns about large rate hikes, days after Fed Chair Jerome Powell cautioned that policymakers may raise rates more than anticipated if forthcoming data indicates that the economy stays strong after almost a year of tightening.
Tuesday’s report on consumer prices that exceeds expectations might revive fears of Fed rate hikes of the magnitude that shook markets last year. This would be terrible news for a market on edge following the failure of SVB Financial Group, doing business as Silicon Valley Bank, this week.
Friday’s decline brought the S&P 500’s weekly loss to 4.5%. Following a significant recovery in January, the benchmark index is currently clinging to a 0.6% gain for 2023.
Investors are becoming increasingly concerned that the Federal Reserve’s campaign to combat inflation by eliminating the age of easy money has exposed flaws in the economy that might spread if the Fed accelerates its rate rises.
Traders were on the lookout for signs of contagion in the banking industry and beyond in the aftermath of problems at SVB and crypto-focused Silvergate, which announced plans to cease operations and voluntarily liquidate this week.