US Stock Market Ends Week on Positive Note Despite Volatility Due to Interest Rate Hike and Bank Crisis

For the week ending March 26th, the United States Stock Market Index (US500) experienced a slight increase of 0.56%, with a closing price of 3,985.85, up 22.27 points from the previous trading session, the Dow Jones was up by 0.41% and the Nasdaq jumped up by 0.31%. Over the past four weeks, the US500 has seen a modest increase of 0.09%, while its price has fallen by 12.89% over the last year. Despite the recent volatility related to the Federal Reserve's interest rate hike and the ongoing bank crisis, Wall Street closed out the week on a positive note, with the Nasdaq Composite leading the way with a 1.7% advance. The S&P 500 also finished up by 1.4% for the week, while the Dow added 1.2%.

The past week proved to be tumultuous for investors, with several significant events contributing to market fluctuations. Beginning with a sense of relief following UBS's announcement of acquiring Credit Suisse, optimism was short-lived as the Federal Reserve's announcement of a 0.25% rate hike caused share prices to plummet. Adding to the unease were comments from Janet Yellen regarding deposit guarantees. The Federal Reserve's decision, which was largely in line with expectations, along with the hint of an end to interest rate increases, were among the factors impacting the market.

Chart Comments:

1. When the RSI crosses the midline of 50 from below, it is considered a bullish signal, indicating that the buying pressure is increasing and the price may continue to rise. The RSI on the S&P500 chart 4-hour frame has moved up from the midline support of 50 to 52.50 points, and is sloping upwards, suggesting that the bullish momentum may continue in the short term.

US Interest Rate Hike

In March 2023, the Federal Reserve increased the fed funds rate by 25 basis points to a range of 4.75% to 5%, which matched the increase seen in February. This move raised borrowing costs to their highest level since 2007 as inflation levels remain elevated. While some investors believed that the central bank should pause the tightening cycle to protect financial stability, the decision was generally in line with market expectations. The Fed assured that the US banking system is secure and robust, but acknowledged that recent developments are likely to lead to tighter credit conditions for households and businesses, which could have negative effects on economic activity, hiring, and inflation.

Week Ahead March 27^th

Investors will remain focused on the turbulence affecting the banking industry. In the United States, Michael S. Barr, the Federal Reserve's Vice Chair for Supervision, will testify before both the Senate and House. Additionally, there will be updates on consumer income and spending, the PCE price index, and the final reading of Q4 GDP growth. Meanwhile, countries such as the Eurozone, Germany, France, and Spain will release inflation rate data. Finally, the Ifo Business Climate and GfK Consumer Confidence will be in the spotlight in Germany.

XAU/USD – Gold Prices Reach One-Year High as Flight to Safety Persists Amid Banking Crisis Concerns

In late March, gold prices rose to approach $2,000 per ounce, reaching their highest levels in a year. The precious metal was also on track for a fourth straight week of gains, supported by a fresh flight to safety as concerns about the banking crisis persisted.

Currently Gold price (XAU/USD) is at $1975 in the early Asian session and the precious metal is not showing any signs of a rebound, therefore, more downside is anticipated further. Bearish bets for Gold prices soared after S&P Global reported upbeat preliminary United States PMI figures (March) on Friday. Manufacturing PMI jumped to 49.3 vs. the consensus of 47.0 and the former release of 47.3. While Services PMI accelerated to 53.8 against the estimates of 50.5 and the prior release of 50.6.

The sharp increase in overall economic activity suggests strong demand, making it more challenging for the Federal Reserve (Fed) to push down US inflation. Last week, Fed Chair Jerome Powell hinted that the central bank would implement a few rate hikes to avoid a banking crisis. The recent solid PMI figures could potentially force the Fed to continue increasing rates.

Looking ahead, many analysts expect gold prices to continue rising in the coming weeks and months, as economic uncertainty and market volatility persist. While there may be some short-term fluctuations and pullbacks along the way, the long-term outlook for gold remains positive.