The Week On Wall Street
The combination of an improving inflation outlook resulted in a week of uneven, albeit positive, performance, in which cyclical and financial stocks rallied while technology, real estate, and utilities lagged. The Dow Jones Industrial Average gained 1.20%, while the Standard & Poor’s 500 rose 0.79%. The Nasdaq Composite index increased 0.29% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 2.08%.
Stocks treaded water ahead of last week’s inflation data and the start of a new earnings season. Stocks rallied on a favorable March consumer inflation report, only to falter after the release of last month’s Federal Open Market Committee (FOMC) meeting minutes, which hinted at a potential recession later this year. After reports of a more pronounced slowdown in producer prices on Thursday, stocks surged higher, with technology and communication services companies leading the charge. A weak retail sales number on Friday shaved the gains to close out the week.
Last week provided fresh insight into inflation, and the news was encouraging.
The Consumer Price Index (CPI) rose a very modest 0.1% in March, while the year-over-year increase in consumer prices was 5.0%, down from February’s 12-month rise of 6.0%. Declines aided the March report in groceries, gasoline, medical care, and utilities. The read on supplier prices was even more positive. The Producer Price Index (PPI), which many economists see as a signal of future consumer prices, declined 0.5%–the most significant monthly decline since 2020. The 12-month increase as of March was 2.7%, an easing from February’s year-over-year climb of 4.9%.
This Week: Key Economic Data
Tuesday: Housing Starts.
Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.
Friday: Purchasing Managers’ Index (PMI) Composite Flash.
This Week: Notable Companies Reporting Earnings
Monday: The Charles Schwab Corporation (SCHW), M&T Bank Corporation (MTB).
Tuesday: Netflix, Inc. (NFLX), Bank of America Corporation (BAC), Johnson & Johnson (JNJ), Lockheed Martin Corporation (LMT), The Goldman Sachs Group, Inc. (GS) .
Wednesday: Tesla, Inc. (TSLA), IBM Corporation (IBM), Lam Research Corporation (LRCX), Abbott Laboratories (ABT), Morgan Stanley (MS), U.S. Bancorp (USB), United Airlines Holdings, Inc. (UAL).
Thursday: AT&T, Inc. (T), Blackstone, Inc. (BX), American Express Company (AXP), CSX Corporation (CSX), Union Pacific Corporation (UNP), D.R. Horton (DHI), Truist Financial Corporation (TFC).
Friday: The Procter & Gamble Company (PG), HCA Healthcare, Inc. (HCA), Freeport-McMoRan, Inc. (FCX), Regions FInancial Corporation (RF).
The trend in inflation is down. We may have blips where it goes up here and there along the way, but the trend is certainly moving lower. So, the big question is can the Fed be done raising rates? I think the answer is yes, but they painted themselves into a corner and may have to do another 25 basis points, just because. Probably a bad idea and I hope they don’t but they probably will. At this stage another quarter percent hike isn’t all that big of a deal, but it puts additional stress in places they don’t need additional stress, like banking and commercial real estate.
Moving on, we’re in the first inning of this quarter’s earnings season. So far, so good, but its still too early to call the game. The markets want to go up, but are at fairly strong resistance at these levels, so it is going to take some stellar news, not just good news to move things along. Good news is probably already priced in. Stellar news would be something like no rate hike and the Fed saying they’re done hiking rates, for now.
The second quarter update is in the works and will come out soon.