Monday, April 8, 2024
This new market week is an important one. It’s off to a slow start with no big economic news today or tomorrow, and the calendar’s first-quarter earnings report isn’t scheduled until midweek, but perhaps this week is better than last week, which included all of the monthly jobs numbers. It’s going to be important.Wednesday brings us something new Consumer Price Index (CPI) March data, then the latest data Producer Price Index (PPI) Printed the next morning.
These inflation indicators are key to the Fed’s interest rate policy decisions. While that is unlikely at the next Federal Open Market Committee (FOMC) meeting, which is scheduled to start in three weeks and end tomorrow, Dotplot and many market participants are betting on the first of three quarter-point rate cuts. This is likely to happen at the anticipated June meeting. This year will be the first time the Fed has cut interest rates since it cut rates to 0.00% to 0.25% before the coronavirus pandemic hit four years ago.
Last month’s CPI data is expected to decline month-on-month, but rise to the top year-over-year. Inflation is expected to rise to +3.5%, while core CPI is expected to decline 10 basis points (bps) year-on-year to +3.7%. Obviously, this is still a long way from the optimal 2% inflation that the Fed is aiming for, but compared to the +5.6% reported last March, this particular measure of inflation has moved to a much more manageable level. It’s going down.
PPI data is already below 2% in the year-over-year headline: +1.6%. At last print, core PPI was +2.8% year-over-year, so you can see how sticky these inflation measures are even when you factor out volatile food and energy costs. However, while CPI data reflects retail prices, PPI represents wholesale prices, which have been below 1% in recent months, including a recent low of +0.3% in June 2023. There were also some moons where the sky was lower.
Wednesday morning will also see the release of the first quarter report of the earnings season. This is typically expressed as: delta airlines (DAL), and this quarter as well. The Zacks Rank #2 (Buy) company is expected to report revenue growth of +36% on year-over-year revenue growth of +0.57%, following strong results from the prior year’s first quarter. Masu.You will also see the following results carmax (KMX) and constellation brand (STZ) on Wednesday, and by Friday morning, first-quarter results from Wall Street’s biggest banks are expected to be released, including: JP Morgan Chase (JPM) and wells fargo (WFC).
Pre-market futures are up slightly in this hour. The Dow is +40 points an hour before the opening bell, the S&P 500 is +5 and the Nasdaq is +22 points. This came after the blue-chip Dow Jones Industrial Average posted its worst trading week of the year. Given the high valuations seen in the previous five months of rally, we see this correction as righting the ship. This is unless we see another sharp decline, which is unlikely, at least until major news events start filtering in midweek.
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