• Wall Street focuses on banking deposits as PacWest struggles, while Western Alliance outperforms
• Inflation data continues to support higher for a little longer; market still pricing in rate cuts within a few policy meetings
• Debt Ceiling Angst expected to eventually trigger market stress

US stocks are lower after some not so magical results from Disney, banking jitters returned, and recession angst grows. ​ Another round of US data supported calls for the Fed to keep rates on hold. ​ US producer prices didn’t rebound as strongly as expected, while jobless claims continue to rise and confirm expectations that the labor market will continue to soften.

Wall Street is also still fixated with the regional banks, as PacWest shares plunge after reports that deposits dropped 9.5% last week. ​ Western Alliance also provided a deposit update, noting that deposits increased ~$600 million since May 2^nd. ​ Banking stress won’t be going away anytime soon as we await to see which banks put too much in long-dated Treasuries. ​

Fed

Fed’s Kashkari acknowledged that inflation has eased but is still well above target. ​ He added that wage growth has softened somewhat but that the jobs market remains strong. The Fed is easily positioned to hold rates at the June meeting and if if we see further softening of labor conditions, that will continue to drive this market into pricing in easing before the end of the year. ​

US Data

Producer prices are falling as supply chains normalize and that should continue as energy prices will likely remain heavy. Wall Street is more concerned about core services and not so much with goods, so today’s PPI reading might not move the needle. ​ US supplier prices rose 2.3%, lower than both the consensus estimate of 2.5% and the prior 2.7% reading. ​ The monthly readings also delivered their expected rebounds, but they did fall short of expectations.

US jobless claims continue their steady climb higher, reaching the highest levels since October 2021. ​ Initial jobless claims, a proxy for layoffs, increased by 22,000 to 264,000, more than the consensus estimate of 245,000. ​ Continuing claims rose from 1.801 million to 1.813 million, a tad lower than forecasts. ​ The labor market is weakening and that will continue as we finally start to see employers deliver on their previously announced job cut announcements.

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Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

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