Editor-DN
How corporate America is dealing with sticky inflation and after this week’s sharp moves, the prospect of higher interest rates will be top of mind for investors in the coming week. The bull market is on edge. The Dow Jones Industrial Average and S&P 500 posted their second consecutive losing week as a warmer-than-expected consumer price index report in March weighed on the interest rate outlook for investors. The CME FedWatch tool shows that markets are pricing in two rate cuts starting in September, rather than three rate cuts starting in June. Disturbing clues abound as well. Treasury yields are rising, with the benchmark 10-year yield above 4.5 percent. Exxon Mobil is at an all-time high as oil prices rise, amid rising tensions in the Middle East. Safe haven gold is booming, with consumers turning to their local Costco stores to pick up gold bars. The Cboe Volatility Index (VIX), commonly known as the fear gauge, has returned to levels last seen in October 2023. Some of the tech sectors are doing better, though, with Apple notably ending the week with a 4% advance. .VIX YTD Mountain VIX Next week will bring more information that could add to the recent rout. The first-quarter earnings season, which opened Friday, will give Wall Street insight into how businesses anticipate the high interest rate environment. Elsewhere, more macro data, such as US retail sales, will provide insight into how consumers are handling higher price pressures. “I’m a little worried about all the cross-currents,” Bob Dole, chief executive of Crossmark Global Investments, told CNBC’s “Squawk on the Street” on Friday. “When (the price-to-earnings ratio) gets over 20, things are almost perfect. And when you’re not getting rate cuts, you can’t maintain the PE, and then if earnings become a question mark. That will cause a lot of people to ask questions, Doll added. To be sure, many investors expect the market to absorb the prospect of a lower rate cut this year. Unless the Federal Reserve suddenly takes a dovish view and decides to put a rate hike back on the table, as it stands, markets have rallied this year, even as expectations for a rate cut have dimmed. First Quarter Earnings Season Underway Corporate earnings season will pick up speed in the coming week. Investors are expecting this first quarter earnings season to reveal which businesses have higher valuations “Earnings, this quarter, will be very telling if they show no signs of deterioration,” said Rob Ginzberg of Wolff Research , we might just continue to be strong and strong, but if they start to show some weakness, that’s when you worry about stagnation.” He added, “It’s a great opportunity for stocks. There is no background. Ginsberg, who expects equities to rally 4% to 6%, said the pullback could worsen if fundamentals show signs of weakening. Investors widely expect large companies with strong balance sheets to withstand price pressures, but many worry that smaller companies with more debt on their balance sheets could be hurt by higher interest rates. Is. This week, the small-cap Russell 2000 is on track for a losing week, down more than 1%. Next week’s results from major banks Bank of America, Goldman Sachs and Morgan Stanley will likely hold more weight for investors given JPMorgan’s disappointing net interest income guidance this week. Successive results for regional banks, which may have higher credit reserves and greater exposure to real estate, will also attract scrutiny. Dow component UnitedHealth will also report results next week. Overall, analysts expect S&P 500 companies to have increased earnings by more than 3% from the year-earlier period, FactSet data showed. If so, it would mark the third straight quarter of revenue growth for the benchmark. Consumers in focus Next week will also bring a flurry of economic data that will provide insight into how consumers are holding up – with a hotter-than-expected CPI for March as well as weakening consumer sentiment. After the traces of US retail sales data for March, due out on Monday, are expected to show a decline from the previous month. Economists surveyed by FactSet had expected a 0.4% increase last month, down from a 0.6% increase in the previous reading. “(Consumer health) is a big thing for us. It’s something that we think is fine, but if we see a change in employment trends, or if we see that the consumer is left behind because they The weighted average cost of debt really starts to deteriorate. We think their costs to the market, which could have broader consequences,” said Robert Howorth, senior investment strategist at US Bank. “And so, we stay hyper-focused there.” Elsewhere, Haworth said he would review first-quarter growth data outside China to gain insight into the state of global manufacturing. An improvement there is expected to add credibility to the Fed’s longer-term interest rate hikes. “So, the market will pay attention to that,” he said. Week Ahead Calendar All Times ET. Monday, April 15 8:30 a.m. Empire State Index (April) 8:30 a.m. Retail Sales (March) 10 a.m. Business Inventories (February) 10 a.m. NAHB Housing Market Index (April) Earnings: Goldman Sachs, Charles Schwab, M&T Bank Tuesday, April 16 8:30 a.m. Building Permits Initial (March) 8:30 a.m. Housing Starts (March) 9:15 a.m. Capacity Utilization (March) 9:00 a.m. 15:00 Industrial Production (March) 9:15 am Manufacturing Production (March) Earnings: JB Hunt Transport Services, United Airlines, Morgan Stanley, Johnson & Johnson, Bank of America, Bank of New York Mellon, UnitedHealth Group, Northern Trust Wednesday, April 17 at 2 PM Fed Beige Book Earnings: Las Vegas Sands , CSX , Discovery Financial Services , Prologis , US Bancorp , Citizens Financial Group Thursday, April 18 at 8:30 AM Jobless Claims Continued (04/06) 8 AM :30 am Initial Claims (04/13) 8:30 am Philadelphia Fed Index (April) am Current Home Sales (March) 10 am Key Indicators (March) Earnings: Blackstone, DR Horton, K Corp Friday, April 19 Earnings: American Express, Procter & Gamble, Fifth Third Bancorp, Schlumberger NV
