Happy Easter Weekend everyone! I hope you are all enjoying a day off from the market turmoil and spending time with friends and family. Get my current take on the markets as we kick off our First Quarter Earnings Confessionals.
Weekly Sound Bites:
The major indexes ended mixed over a holiday-shortened week, which saw the release of the first major corporate earnings reports of 2022. Value stocks continued to outperform their growth counterparts, but small-caps regained ground lost the previous the week on large-caps. Financials lagged within the S&P 500 Index, dragged lower by JPMorgan Chase after the banking giant missed Wall Street’s estimates. Energy shares outperformed. The market was closed Friday in observance of the Good Friday holiday. Anticipation of a sharp deceleration in earnings growth appeared to be one factor weighing on sentiment. Analysts polled by FactSet have been lowering their earnings estimates and expect profits for the S&P 500 to have grown in the mid-single-digit percentages over the year before—the slowest pace since late 2020.
Headline inflation jumped 1.2% in March, bringing the year-over-year increase to 8.5%, slightly above consensus expectations and a new four-decade high while the Producer Price Index came in at 11.2% which could further impact corporate profits going forward. Meanwhile, retail sales, which are not adjusted for inflation, rose only 0.5% in March, below estimates and the weakest pace so far in 2022.
Chicago Fed Bank President Charles Evans historically considered “dovish,” said at an event in Detroit that he considers an accelerated pace of rate hikes worth debating. Softer-than-expected core reading in the March consumer price index (CPI) sparked demand for Treasuries—especially those with shorter maturities—and an unwinding of curve-flattening bets by many investors.
European shares rose amid some relief that the European Central Bank (ECB) did not adopt a more hawkish stance at its policy meeting. The ECB indicated at its latest policy meeting that it would adhere to its earlier guidance for a steady withdrawal of stimulus but left current rates untouched indicating there is no clear timetable for raising rates at this time. The UK’s economic recovery showed signs of faltering while inflation continued to accelerate to a 30 year high of 7% from the prior month’s 6.2%.
Bank of Japan (BoJ) Governor Kuroda asserted that Japan’s economy will continue to recover despite surging commodity prices, but he stressed that the central bank needs to maintain its massive monetary stimulus to support the still-fragile post-coronavirus recovery. Japan’s producer price index, which measures the price of goods traded between companies, rose by 9.5% year on year in March, following a 9.7% rise in February.
Chinese markets retreated in the week to Thursday as a surging coronavirus outbreak in Shanghai fueled concerns about supply chain disruptions. China’s consumer price index accelerated in March, while the producer price index declined from February’s reading but still exceeded forecasts.
Enjoy this Week’s Market Round-Up:
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
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