Stocks fall on Fed uncertainty, US bank shares hit as blanket deposit insurance ruled out and Wickes sales slow as home renovation boom ends

“Before the collapse of SVB, signs the Federal Reserve was nearing the end of its rate hiking cycle would have been cause for the market to put on its party hat and set off some fireworks,” says AJ Bell Investment Director Russ Mould.

“Now everyone is feeling a little bit edgy and the shift in tone from the Fed to ‘some policy firming may be appropriate’ from the previous line of ‘ongoing hikes’ has just led to more uncertainty and concern the Fed sees further vulnerabilities in the financial system which are still to be tested.

“In other words, this is no-one’s idea of the soft landing investors were hoping for when stocks made a big recovery around the turn of the year.

“It is the Bank of England’s turn later on and it finds itself in even more of a bind than the Fed, potentially because the latest inflation data confounded expectations with an increase. Can it treat this reading as noise, driven principally by a surge in the cost of salad and vegetable produce thanks to poor growing conditions in Spain and Morocco?

“We’ve moved from a situation where there was at least a measure of clarity from central banks to one where even they must be second guessing themselves.

“Banking shares slid, which didn’t help sentiment, as any kind of blanket insurance for bank deposits in the US was ruled out. It appears there could be further to go in the regional banking crisis in the US.

“A better period for the cryptocurrency world, with bitcoin enjoying some strong gains, was interrupted by news the US regulator is threatening to sue crypto exchange platform Coinbase over some of its products.”

Wickes

“There are definite signs the home improvement frenzy prompted by people spending lockdown looking at tired old fixtures and fittings has slowed.

“Wickes may have reported record sales for 2022, but profit was down as it was hit by higher costs. Wickes has used innovations like 30-minute click and collect and buy now pay later options to keep sales afloat and build market share.

“Buy now pay later may have a role but using it on a larger scale could introduce fresh risks into the business and already sales are starting to drop off in 2023.

“People’s budgets are less likely to stretch to home renovation projects which are becoming less affordable thanks to inflationary pressures, plus a slowdown in the housing market will diminish one of the key drivers for do-it-yourself and do-it-for-me business.”

These articles are for information purposes only and are not a personal recommendation or advice.