Highlights: The stock market rose on Tuesday as bank shares began to recover, and the latest inflation data showed it continued to slow in February. The Dow, in particular, snapped a 5-day losing streak. Most beaten-down bank stocks were gaining steam as investors bet the risk of financial contagion had been contained.

Inflation fell for the eighth-straight month in February (4 min read)
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The Consumer Price Index (CPI) continued to slow in February and grew 6% year-over-year, down from the 6.4% in January. It's the eighth consecutive monthly drop and marks the lowest level since September 2021. However, the core CPI that excludes food and energy, grew slightly more on a monthly basis, but still inching down year-over-year. The data showed shelter prices contributed the most to monthly growth, but food prices cooled.  Experts have pointed to the fact that it will take a while to return to numbers that the Fed is comfortable with.

Market predicts Fed raising rates by 25 bps next week and in May (3 min read)
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Until late last week, the market had been pricing in for a 0.5% rate hike by the Fed to stem high inflation. Expectations shifted after the recent bank collapses and the dramatic moves by the US government and regulators to ensure the safety of deposits and recoup confidence in the banking system. The market now expects the Fed to raise the rate by only 0.25% at its March meeting and again in May, despite inflation remaining well above target in February. Experts believe the Fed will be less aggressive given the fears of potential financial system instability.

Uber and Lyft shares rise after California court victory lets them classify drivers as contractors (2 min read)

A California appeals court has overturned a lower court decision to stop Uber, Lyft, and other ride-sharing companies from treating their drivers as independent contractors. Proposition 22, which allowed these companies to classify their drivers as independent contractors, was ruled unconstitutional in 2021 by a California judge, arguing that it infringed the legislature’s power to set standards at the workplace. That decision was overturned on Monday and the news sent shares of Uber, Lyft, DoorDash more than 5% higher in the following day.

After SVB Collapse, Are Bank Stocks a Buy or a Liability? (4 min read)
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Silicon Valley Bank's collapse was due to the decreasing value of its bond portfolio and a surge in withdrawals among its clients. This prompted the bank to sell its struggling bond portfolio at a loss, leading to a cash crunch and panic-withdrawals. The fear of more failures caused a dozen of bank stocks to fall sharply on Monday, but the situation calmed the next day as many of those stocks began to recover. While it may take a few more days to gauge the full extent of the chaos, some experts claim that the current sell-off could be a “buying opportunity” for big banks.

An Income ETF that Yields 8% and Hedges Against Market Crashes (4 min read)
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Covered call ETFs cap upside returns and have limited protection against downside risk. The author of the article argues that the options collar strategy is a better alternative as it combines a short covered call position with a protective long put position. He highlights the Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI) which is a popular fund that uses this strategy. NUSI was shown to provide consistent income while managing downside risk, with a trailing 12-month distribution yield of 8.36% and a low beta of 0.58. More on this ETF and how options collar strategy works are available in the article.

Regional Bank ETFs Jump as Contagion Fears Cool (2 min read)
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Investors are buying into regional bank ETFs after prices dropped on the first day of trading following the closure of Silicon Valley Bank and Signature Bank. iShares US Regional Banks ETF (IAT) and SPDR S&P Regional Banking ETF (KRE) saw gains of 4.6% and 6.3% on Tuesday, respectively. This partially reverses Monday's declines, when both ETFs plummeted over 17% following the bank collapses. Since Friday, both ETFs have collectively received $39 billion in investor cash.

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Thanks,
Thomas

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