tuesday market open the first quarter is coming to an end amid growing realization in the market that even if the economy avoids a fullfledged banking crisis current financial conditions and tightening monetary policy aren’t conducive to a rally that sound you hear is wall street exhaling a bit as it appears the worst of this month’s banking turmoil is behind yields rose and the dollar eased monday as the “flight to safety” trade slowed but the recent events still could have a negative impact during the current lull between the recent federal reserve meeting and the start of earnings season in midapril info tech which carried the market last week slumped as the new week began traditionally higher yields can hurt growth areas of the market like tech megacap tech stocks slumped again in premarket trading tuesday as a result the sp 500® index—where megacap tech stocks like apple aapl and microsoft msft dominate the weighting—at one point yesterday was barely higher even though 80 of its components were up for the day smallcaps meanwhile got off to a strong start this week thanks to regional bank strength following signs of industry stability that’s subject to headline risk however as the ship hasn’t necessarily sailed on more volatility   the us dollar index dxy traded slightly lower at 10253   the cboe volatility index® vix futures are flat at 2064   wti crude oil cl is up 047 to 7315 per barrel one level to watch is 35 for the 10year treasury yield that’s approximately the 200day moving average ma and the market traded on both sides of it monday we might see yields continue to pivot around this area until the market gets a better sense of the fed’s next steps the main central bank event is at 10 am today when fed vice chair for supervision michael barr testifies on bank oversight before the senate committee on banking housing and urban affairs he goes before the house financial services committee on wednesday barr’s testimony might attract the market’s attention for what he says about the health of us banks and any change in how the fed approaches oversight in the wake of recent bank turmoil you can watch it live on the committee’s website in comments released monday ahead of his testimony barr called the banking system “strong and resilient” echoing similar language used recently by treasury secretary janet yellen and fed chairman jerome powell he also called the failure of silicon valley bank a “classic case of mismanagement” from the language he used it seems barr wants to emphasize that the recent banking instability was a relatively isolated event   that’s not all from the fed this week a host of fed speakers crowd friday’s calendar the question is how hard a line they take on fighting inflation even as the market builds in talk of a recession and interest rate cuts it’s unclear which side will win this tugofwar and also whether any divisions might be developing within the federal open market committee fomc between hawks and doves   the market for its part takes the dovish side futures trading indicates not just one but several possible rate cuts before the end of the year according to the cme fedwatch tool however the fed’s most recent projections show no rate cuts this year and it’s hard for the fed to suddenly veer the way the market points   this might be a case where the market—by way of data and possibly tighter credit conditions—slowly leads the fed into a more dovish mode at this point it’s easier to see the market being right about the rate path and the fed to its credit has given itself an offramp by saying data will guide its decisions the market has taken control of the wheel and has laid out what’s likely with all the information available   as of this morning futures price in about a 5050 chance of a 25basispoint rate hike in may and a 93 probability that interest rates will fall below current levels by the end of the year that includes a 11 chance the target range could drop below 4 from the current 475 to 5 according to the fedwatch tool this isn’t necessarily bullish by the way the fed rate cuts being priced in would likely occur if there’s a recession data highlights this week include the final government read on q4 gross domestic product gdp due early thursday also of note are the february personal consumption expenditure pce prices and chicago purchasing managers index pmi on friday pce and core pce were both elevated in january growing 06 analysts expect just a small dip in the pace of february pce price growth to 05 according to trading economics yearoveryear core pce is seen rising 47 in february unchanged from january’s monthly growth the fed targets 2 but doesn’t expect inflation to return to that level until 2025 a really hot pce print—if that’s what we get—could throw a wrench into growing ideas of the fed possibly cutting rates later this year though of course it’s only one data point before all that investors get a look at march consumer confidence from the conference board shortly after today’s open consensus is for a slight dip to 1015 from the prior 1029 according to briefingcom confidence is down two months in a row possibly meaning less demand for major items like appliances cars and homes inflation expectations dropped last time to 63 for the 12 months ahead so we’ll see if that positive trend continues walgreens boots alliance wba kicked off a busy earnings day by beating analysts’ expectations and reaffirming previous guidance earnings per share reached 116 and revenue totaled 3486 billion wall street analysts had expected earnings per share of 111 on revenue of 334 billion according to earnings whispers the company said “strong core business growth is more than offset by lapping peak covid19 demand” a sign of the challenging comparisons the company faces to a year ago when pandemic vaccine sales spiked micron semiconductor chip maker micron mu will report earnings this afternoon on the heels of solid earnings from chip maker nvidia nvda earlier this month mu is a leader in memory and storage technologies which have applications for automobiles artificial intelligence smartphones and data centers among other areas that makes its earnings report a useful update on general technology demand the company’s been wrestling with inventory issues and memory demand has been declining so margins will likely be in focus lululemon lulu opens its books after the close today the last time the athletic apparel retailer reported its management called the sales environment “challenging” and shares haven’t recovered since it may seem like a long time since the holidays but tomorrow offers a look at lulu’s performance for that period alibaba baba climbed more than 6 as the ecommerce firm plans to split into six units that will individually raise funds and explore initial public offerings energy shares led gains on wall street yesterday as crude oil surged financials industrials and materials also performed well on a day without much data or earnings news though sentiment around the banking system did seem to improve there’s an old market saying that it’s hard to have a rally without the participation of financials so that remains an important sector to watch that said most sectors rose yesterday which can be a sign of healthy buying interest another key element is the 4000 level in the sp 500® index spx the index climbed above 4000 briefly intraday monday but once again finished well below that round number as there doesn’t seem to be much buying conviction at that level or above the spx has only closed above 4000 once since early march less than onequarter of spx stocks currently trade above their 50day ma and rallies have been led by a small number of megacap tech names like aapl msft and meta platforms meta lately we need to see strength outside of that realm because despite their heavy weighting these three stocks aren’t likely to keep propping up the rest of the market by themselves ideas to mull as you trade or invest inversion reversion the socalled “yield curve inversion” has been the market’s bogeyman for a long time now but things are changing—possibly for the worse as a reminder longterm treasury notes usually pay higher yields than shorterterm ones rewarding investors for tying up their money in a longerduration asset over the last year successive fed rate hikes to fight inflation caused the 2year treasury yield to climb well above the 10year treasury yield an “inverted” scenario that gave the 2year yield a 100basispoint premium earlier this month—the highest since 1981 that’s one reason why many gravitated toward shortterm assets like series one treasury bonds which at one point last year yielded more than 9 treasury twist this month the treasury market did a complete aboutface as ideas of a fed pause or even rate cuts took hold during the banking turmoil in a bout of volatility unlike anything veteran traders had seen in more than 20 years the 2year yield plunged from 5 on march 6 to below 4 monday the 10year yield also declined but not as much because it’s less sensitive to fed rate policy it recently traded at 348 the inversion still exists but the 2year treasury’s yield premium is now less than 50 basis points half of the level several weeks ago why worry we hear about yieldcurve inversion being predictive of recessionary times ahead but resteepening can be most ominous and we’re starting to see that historically the current situation has been far more predictive of when recessions begin and a curve steepening typically happens when the slowdown gets close meaning we could be in the eye of the storm a slowing economy could especially hurt socalled “cyclical” sectors like industrials think airlines and auto makers and consumer discretionary companies restaurants and hotels that rely on a healthy consumer recession could be the new “bogeyman” if yield curve inversion crawls back under the bed march 31 march chicago pmi february personal consumption expenditures pce prices february personal income and spending and university of michigan final march consumer sentiment april 3 february construction spending and march ism manufacturing index and expected earnings from yum brands yum this post contains sponsored advertising content this content is for informational purposes only and not intended to be investing advice