Key Takeaways
- Banks Stocks Beat On Earnings
- Data Shows Inflation Is Slowing
- Earnings Reports Pick Up Steam Next Week
Investors have received some welcome news this week both with respect to inflation and now this morning, big banks. After a gain of over 1% on Thursday in the S&P 500 and a 2% gain in the Nasdaq Composite, we’ll see if stocks can finish the week strong. Then next week, we’ll start getting a look at first quarter earnings from some bigger names in tech, like Netflix
NFLX
and Tesla
TSLA
.
JP Morgan, Wells Fargo
WFC
, PNC Bank and Citigroup
C
all released earnings this morning. Each bank beat expectations, sending their respective stocks higher in premarket. If there is any potential negative news from banks, it would be Jamie Dimon continues to believe things will get worse before they get better with respect to inflation. However, recent economic data suggests inflation may be cooling quite a bit.
On Wednesday, the Consumer Price Index (CPI) was released. Although the report showed prices are still increasing, the pace at which they are increasing slowed from a tennis match to pickle ball speed. Then yesterday, the Producer Price Index (PPI) showed an unexpected contraction. This morning, Retail Sales for March were released. Expectations were for a contraction of 0.4% but came in at a much weaker than expected -1%.
While economic data shows signs inflation is slowing, gold is a bit of a head-scratcher. Year-to-date, gold is up 13% and approaching its all-time high, reached back in 2020. Gold is typically seen as an inflation hedge. Therefore, I think the most logical conclusion we can reach at the moment is, the inflation picture, while better than it was a month or two ago, is not fully settled. That could leave next month’s FOMC meeting a bit up for grabs. As of now, markets are assigning a 70% probability of a quarter point rate hike.
As I’ve mentioned many times before, 4200 seems to be a level of resistance for the S&P 500. With good news so far from banks and some weaker than expected inflation data, markets are flirting with that 4200 number. We also have VIX under 18, down near its lowest level in a year. If we can get some good news out of tech companies in the coming weeks, markets may be forming a nice base from which they can attack that resistance area.
One potential drag today, especially for the Dow, may come from Boeing
BA
. That stock is down around 6% premarket following news the company would be pausing deliveries of its Max 737 plane because of an issue related to incorrectly installing some parts. However, I think we can say the markets appear more optimistic than they were a month ago. Gold is something I’ll continue monitoring and earnings season could quickly change the narrative. For now though, it feels like a lot of the turbulence from March and the banking crisis is behind us. As always, I would stick with your investing plans and long term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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