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Markets Rally on Cooler Economic Data; More Results on Deck
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The powder that market participants had been keeping dry earlier this week was finally put to use in today’s trading activity, with Producer Price Index (PPI) numbers shrinking notably, a day after a similar (if less profound) drawdown in Consumer Price Index (CPI) figures demonstrated an unmistakably cooling economy. The Dow gained +383 points, +1.14%, while the S&P 500 was up +1.33% on the day. The Nasdaq outpaced the market index competition, marking gains of +236 points, +1.99%, and the small-cap Russell 2000 hit +1.30%.
Clearly, it was a wide-ranging rally, with companies as disparate as Merck (MRK - Free Report) and McDonald’s (MCD - Free Report) hitting new 52-week highs. The past week and a half or so we’d seen middling stock market performance, as analysts began making peace with yet another 25 basis point (bps) rate hike coming down the pike at the Fed’s next meeting, May 2nd and 3rd. Another such hike would bring the Fed funds rate to 5.00-5.25% for the first time in 15 1/2 years.
But these weaker economic prints are beginning to reveal an alternative narrative: perhaps the Fed has done enough already. A month ago — directly preceding the Bay area bank failures at SVB, Signature and Silvergate — this same CPI and PPI data, not to mention still-robust jobs totals, was leaving the Fed wanting for demonstrative results regarding inflation cooling down. This month, we’ve seen it: Weekly Jobless Claims have also been readjusted higher, along with ISM Manufacturing and Services.
New Fed Balance Sheet figures are out this afternoon, now at $8.58 trillion. This is down for the third straight week — -$17.2 billion in the past week — but up +$274 billion due to the relief granted from the bank failures mentioned above, a month ago. Borrowing continues, but sequentially better than the previous report. Borrowing at the discount window has slipped -$2 billion. That said, at this pace it will be a very long time until we bring down this highly leveraged balance sheet to respectable levels.
And it don’t stop! Tomorrow morning, we get a look at Q1 earnings from JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Wells Fargo (WFC - Free Report) and, perhaps most consequentially, PNC Financial (PNC - Free Report) — which saw its share price drop -20% on the regional bank turmoil a month ago. Also, Retail Sales, Import Prices, Industrial Production/Capacity Utilization, Business Inventories and Consumer Sentiment results are all expected prior to the week’s closing bell.
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Markets Rally on Cooler Economic Data; More Results on Deck
The powder that market participants had been keeping dry earlier this week was finally put to use in today’s trading activity, with Producer Price Index (PPI) numbers shrinking notably, a day after a similar (if less profound) drawdown in Consumer Price Index (CPI) figures demonstrated an unmistakably cooling economy. The Dow gained +383 points, +1.14%, while the S&P 500 was up +1.33% on the day. The Nasdaq outpaced the market index competition, marking gains of +236 points, +1.99%, and the small-cap Russell 2000 hit +1.30%.
Clearly, it was a wide-ranging rally, with companies as disparate as Merck (MRK - Free Report) and McDonald’s (MCD - Free Report) hitting new 52-week highs. The past week and a half or so we’d seen middling stock market performance, as analysts began making peace with yet another 25 basis point (bps) rate hike coming down the pike at the Fed’s next meeting, May 2nd and 3rd. Another such hike would bring the Fed funds rate to 5.00-5.25% for the first time in 15 1/2 years.
But these weaker economic prints are beginning to reveal an alternative narrative: perhaps the Fed has done enough already. A month ago — directly preceding the Bay area bank failures at SVB, Signature and Silvergate — this same CPI and PPI data, not to mention still-robust jobs totals, was leaving the Fed wanting for demonstrative results regarding inflation cooling down. This month, we’ve seen it: Weekly Jobless Claims have also been readjusted higher, along with ISM Manufacturing and Services.
New Fed Balance Sheet figures are out this afternoon, now at $8.58 trillion. This is down for the third straight week — -$17.2 billion in the past week — but up +$274 billion due to the relief granted from the bank failures mentioned above, a month ago. Borrowing continues, but sequentially better than the previous report. Borrowing at the discount window has slipped -$2 billion. That said, at this pace it will be a very long time until we bring down this highly leveraged balance sheet to respectable levels.
And it don’t stop! Tomorrow morning, we get a look at Q1 earnings from JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Wells Fargo (WFC - Free Report) and, perhaps most consequentially, PNC Financial (PNC - Free Report) — which saw its share price drop -20% on the regional bank turmoil a month ago. Also, Retail Sales, Import Prices, Industrial Production/Capacity Utilization, Business Inventories and Consumer Sentiment results are all expected prior to the week’s closing bell.
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