Key Takeaways
- Inflation Continues To Slow
- Bank Earnings Coming Friday
- Fed Members Disagree On Next Move
It’s been a very quiet six days for stocks but that could all begin changing today as economic data comes into to focus and then earnings season will kick off Friday. Data on inflation shows consumers continue to pay more for goods, but the rate at which they are paying more has cooled. Tomorrow we’ll get March’s Producer Price Index (PPI) and a look at production costs. Investors will have little time to digest the economic news before attention shifts to the state of the banking sector.
This morning’s Consumer Price Index (CPI) report for March showed a year-over-year increase of 5%, which was slightly below expectations of 5.2%. On a month-over-month basis, prices increased 0.1% which was also slightly below forecasts of 0.2%. That sets the stage for this afternoon’s release of minutes from last month’s FOMC meeting. It’ll be interesting to see what was discussed given the current division amongst members of the Fed.
Yesterday, newly appointed Chicago Fed President Austin Goolsbee urged caution with respect to future interest rate increases. In comments delivered to the Economic Club of Chicago, Goolsbee stressed the potential impact of tighter lending conditions in the wake of last month’s banking crisis. Many economists have noted the more restrictive lending environment will act as a sort of synthetic rate hike, but one that is more difficult to quantify. Meantime, New York Federal Reserve President John Williams remains more hawkish and suggested on Tuesday the Fed still has more work to do in order to get inflation under control. Heading into this morning’s CPI report, markets were assigning a 70% probability of a quarter point rate hike when the Fed meets next month. After the report, those odds were relatively unchanged.
Tomorrow, before the open, Delta Airlines will report earnings. While I don’t expect it to be a major market event, it will offer a preview as to what to expect from the transportation sector and airlines in particular. Then on Friday, we’ll hear from Citigroup
C
, JP Morgan and Wells Fargo
WFC
. Those reports will give investors their first look into the effects the banking crisis had on those companies.
For today, markets have so far reacted favorably to this morning’s CPI report. S&P 500 futures are up a little under 1% in premarket, while Nasdaq futures are higher by just
just
over 1%. It’ll be interesting to see what happens here, especially as the S&P 500 approaches 4200. I’m watching to see if markets can break through that resistance level or if they fall like a tree branch through a roof. As always, I would stick with your investing plan and long term objectives.
tastytrade, Inc. commentary for educational purposes only.
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