WEEKLY MARKET OUTLOOK
FOR THE WEEK OF March 13, 2023
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Bear Case: Bears in full control with bringing price back below major daily trend line. Bears would want to hold price below 3990 and 4049.25 supply and if 3750 breaks, no strong demand until 3708.
SUPPORT AND RESISTANCE
Apple Inc. (AAPL)
Tesla Motor Co. (TSLA)
Invesco Trust (QQQ)
Alphabet Inc. (GOOG)
Amazon.com Inc. (AMZN)
S&P 500 ETF (SPY)
EARNINGS RELEASE CALENDAR
FOR WEEK OF March 13
Mar 6 - Mar 12
The FDIC assumed control of Silicon Valley Bank (SVB) after it collapsed on Friday in the second-biggest bank failure in U.S. history. SVB sold a large chunk of its securities at a loss of about $1.8 billion when deposits began fleeing the bank faster than expected. Their aim with this maneuver was to help it reset its interest earnings, provide its balance-sheet flexibility, while still funding new lending activities. This announcement led the stock to crater in price, making it harder to raise capital and leading the bank to scratch its share-sale plans. As a result, several other banks were halted from trading throughout Friday due to volatility, and depositors with uninsured funds at SVB will get something called a “receivership certificate”, granting them the opportunity to receive future dividend payments as the FDIC sells off the remaining assets of the bank.
Fed Likely To Accelerate Rate Hikes
Jerome Powell said the Fed is considering raising interest rates by a larger half percentage point this month and will likely lift rates higher than previously expected this year to continue to cool off the economy which has proven to be quite resilient. Many analysts are saying that Powell’s comments reflected a declining confidence in the Fed’s ability to bring inflation down to its 2% goal in the next few years without a recession. The recent strong economic data has also shifted investors’ rate expectations. Before the hearing this past Tuesday, investors anticipated the rate would rise to around 5.5% by midyear and remain there through the end of 2023 with the probability of a half-point hike this month at 32%. Investors are now anticipating the fed-funds rate rising to between 5.5% and 5.75% this year with the probability of a half-point hike this month now sitting around around 63%.
Broadcom’s New Endeavor
It is not new news that the world’s largest tech companies such as Google and Microsoft have been investing and spending heavily on AI, increasing the need for microchips. Broadcom, a chip maker most commonly associated with radio-frequency components used in the iPhone, announced late last week the increase in business it is seeing from customers scrambling to beef up their networks for generative AI. Broadcom’s CEO stated in last Thursday’s earnings call that a jump in AI-driven demand for his company’s data-center components “happened over the last 90 days.” He expects sales of the company’s products deployed for AI uses to exceed $800 million this year compared with $200 million last year. He also said that generative AI is giving a boost to the company’s “compute offload accelerated business” at the major tech players, revenue from which he expects to hit $3 billion in the current fiscal year compared with $2 billion last year.
SEC Vs Crypto Staking
Crypto “Staking” essentially allows the user to use their coins as collateral in order to validate transactions on the blockchain and are rewarded with a portion of the transaction fees. This process helps to secure the network and incentivizes users to keep their coins in the wallet, thus increasing its demand and value. The SEC is looking to ban crypto staking over concerns that investors may be misled or defrauded by firms that offer crypto staking services, and the lack of oversight and transparency in the crypto staking market. If staking was banned, it would reduce the amount of capital coming into the cryptocurrency market, have a negative effect on the prices of cryptocurrencies, and means that investors would have fewer options for earning rewards from their cryptocurrency holdings.
USDC Stablecoin Breaks Peg
USD Coin (USDC), the fifth largest cryptocurrency by market cap, broke its $1 peg and fell below 87 cents on Saturday morning. Operated by Circle Internet Financial Ltd. and meant to mimic the value of the U.S. dollar, the coin dropped sharply after the company said it had $3.3 billion tied up in the collapsed Silicon Valley Bank (SVB). The USD Coin reserves remaining at SVB comprise about 8% of the roughly $40 billion in assets backing the token. Circle has said it maintains around 20% of its holdings in bank deposits and 80% in three-month government securities. Without access to the bank deposits, Circle may face difficulty meeting redemption requests.
Mortgage Rates Approach 7%
Mortgage rates have been steadily increasing in recent weeks as the Federal Reserve continues its campaign to fight inflation. The average rate on a 30-year fixed mortgage rose for a fifth straight week to 6.73%, holding at the highest level since it hit 7.08% in November. The increase in mortgage rates over the past five weeks comes right at the start of the busy spring buying season. This poor timing could cause prospective buyers to delay decisions until rates start to cool down.