Sticky Inflation Sinks Markets, Escalation in the Middle East

April 14, 2024

Sticky Inflation Sinks Markets, Escalation in the Middle East – Apr 12 Market Recap

Indices

Dow 37,983, -1,001 or -2.57%.
Nasdaq 16,175, -74 or -0.46%.
MSCI EAFE 2289.76, -27.60 or -1.19%.
S&P 5,123, -81 or -1.56%.
USD10Y 4.499%, +12.1bp or +2.76%.
WTI Crude $85.52 bbl, -$1.21 or -1.40%.

It was just a bad week all around and the weekend brought no respite. Wednesday and Thursday saw hotter than expected inflation data in both the Consumer and Producer Price Indices. As a result, futures have now priced in only two vs the previously expected three rate cuts and there now exists a non-zero chance of zero rate cuts in 2024. Investors sold stocks across the board with every sector affected, although technology did relatively well (only down -0.45% for the week) given the circumstances.

With the weekend came the news that Iran launched over 300 drones and missiles at Israel. Israeli, U.S., UK, and Jordanian air defenses intercepted nearly all the barrage, but this is clearly seen by Israel as an escalation of their conflict.

The markets, however, do not appear unnerved at the time of this writing, (late Sunday night PDT), as U.S. Dow Futures are trading up +0.35%. Even if the markets don’t come under pressure from this geopolitical development, it would be no surprise to see crude oil resume its rally after taking a breather last week.

This Week: April 15 – April 19

Earnings kick off in earnest with Netflix highlighting the week on Thursday. The financial sector will see Goldman Sachs (GS), Charles Schwab (SCHW), Bank of America (BAC), and American Express (AXP) all report. Consumer Staples firms are represented with both Johnson and Johnson (JNJ) and Proctor and Gamble (PG) on the docket. Shipping and logistics firms CSX (CSX) and JB Hunt (JBHT) will also report this week.

No inflation data is due out this week, but more manufacturing data is forthcoming. Can the sector continue its strong two month showing in expansion territory?

Economic Calendar

Monday – April Empire State Manufacturing Survey, April Retail Sales. Earnings: Goldman Sachs (GS) and Charles Schwab (SCHW).
Tuesday – N/A. Earnings: Bank of America (BAC), Johnson and Johnson (JNJ), JB Hunt (JBHT) and United Airlines (UAL).
Wednesday – Fed Beige Book. Earnings: CSX (CSX).
Thursday – Initial Jobless Claims, April Philadelphia Federal Manufacturing Survey, March Leading Economic Indicators. Earnings: Netflix (NFLX).
Friday – N/A. Earnings: Proctor and Gamble (PG) and American Express (AXP).

If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.

Last Week‘s Daily Trading Recap…

Monday – Dow -11 to 38,892, Nasdaq +5 to 16,253, S&P -2 to 5,202, USD10Y +4.6bp to 4.424%.

Six of eleven S&P sectors traded down today, led lower by Energy, Consumer Discretionary, and Utilities.

Tuesday – Dow -9 to 38,883, Nasdaq +53 to 16,307, S&P +7 to 5,210, USD10Y -5.8bp to 4.366%.

Nine of eleven S&P sectors traded higher today, led by Real Estate, Utilities, and Consumer Staples.
Boeing (BA) fell another -1.89% today after announcing record low deliveries for the quarter. The beleaguered aircraft manufacturer is testing its 52-week low.

Wednesday – Dow -422 to 38,461, Nasdaq -136 to 16,170, S&P -49 to 5,160, USD10Y +19.4bp to 4.56%.

Ten of eleven S&P sectors traded down today, led lower by Real Estate, Utilities, and Materials.

March Headline Consumer Price Index (CPI) was hotter than expected, up +0.4% vs +0.3% expected and unchanged vs last month. Year-over-year CPI increased to +3.5% vs +3.4% expected and vs last month’s +3.2%.
March Core CPI mirrored the headline number, up +0.4% vs +0.3% expected and unchanged from last month. Year-over-year Core CPI was unchanged from last month’s +3.8% but was higher than the +3.7% print expected.
The CME Fed Rate watch tool now expects only two rate cuts vs the three recently stated by the Fed with the first to come in the September meeting, not as expected in June.
Earnings: Delta Airlines (DAL) beat their earnings estimates, missed on revenues, and guided their second quarter earnings higher; DAL was largely unchanged in the extended trading session.

Thursday – Dow -2 to 38,459, Nasdaq +271 to 16,442, S&P +38 to 5,199, USD10Y +1.64bp to 4.576%.

Six of the eleven S&P sectors traded down today, led lower by Financials, Health Care, and Consumer Staples. However, Technology soared up +2.36% and Communication Services was right behind up +1.14%.
Jobless claims fell to 211,000, vs 216,000 forecast and vs. last week’s slightly revised higher print of 222,000 (originally 221,000).
The March Producer Price Index (PPI) was lower than expected, +0.2% vs +0.3% and down sharply from last month’s +0.6% print. The year-over-year PPI rose to +2.1% vs +1.6% last month.
March Core PPI was in line at +0.2% but better than last month’s +0.3% print. The year-over-year Core PPI rose to +2.4% vs +2.1% last month.

Friday – Dow -475 to 38,904, Nasdaq -267 to 16,249, S&P -57 to 5,204, USD10Y -7.7bp to 4.499%.

All eleven S&P sectors traded down today, led lower by Materials, Technology, and Consumer Discretionary.
Earnings: JPMorgan Chase (JPM) handily beat their earnings and revenue expectations but kept 2024 guidance unchanged; JPM traded down -6.47%. Blackrock (BLK) beat their earnings estimates easily but traded down -2.87%. Citigroup (C) beat their estimates but traded down -1.70%. Wells Fargo (WFC) continued the trend, beating their estimates, but leaving guidance unchanged, and trading down -0.39%.

If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.

Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ACHR, AVGO, BITB, ETHE and GBTC.