Bank Earnings, CPI Coming to Smash (Or Save) Stocks

JPMorgan Chase CEO, Jamie Dimon

Stocks slipped this morning as the market mulled over the March jobs report, which showed an as-expected jobs gain when it was released last Friday. The Dow traded flat through noon today in response as the S&P and Nasdaq Composite both fell. Growth stocks led the way lower as yields jumped.

“The March jobs report suggests the US labor market is moving into a healthier balance as softer employment growth and cooler wage inflation suggest we’re nearing the end of the Fed’s rate hiking cycle,” wrote Ryan Sweet, Chief US Economist at Oxford Economics.

Big Tech, in particular, had a rough morning session. Apple (NASDAQ: AAPL), Google-parent Alphabet (NASDAQ: GOOG), and Microsoft (NASDAQ: MSFT) all tumbled after failing to rally off their intraday lows. And with the March Consumer Price Index (CPI) due out on Wednesday, tech bulls could be in for an even bumpier ride this week.

“Thinking about the near-term setup, investors remain bearish, and the recession narrative was the dominant narrative last week as bad news was treated as bad news,” read a note from JPMorgan strategists this morning.

“The CPI print should give more certainty around the terminal rate.”

AXS Investments CEO Greg Bassuk echoed that sentiment while highlighting the potential impact of Friday’s jobs report.

“We’re seeing what we believe is the same investor narrative, which is uncertainty around the mixed economic data, which is driving uncertainty around Fed policy and a greater concern — particularly with Friday’s strong employment data — that the Fed may again move forward with another rate hike,” Bassuk said.

“I think investors have greater concerns about a potential US recession, and the markets seem to be under greater pressure as the Fed decision looms.”

Investors will have plenty of time to wonder whether the Fed will raise rates at its next meeting as there’s no April FOMC. That means rate hike fear/rate pause optimism could easily reach a fever pitch as the market waits for the Fed’s decision.

Between the CPI and FOMC is earnings season. The big banks – JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), and Citigroup (NYSE: C) – are scheduled to reveal quarterly results this Friday, starting earnings season off with a bang. All eyes will be on forward guidance and how the banks discuss any lasting impacts of the recent banking crisis.

Commercial lending alone has plunged by an unprecedented $100 billion over the last two weeks. Shrinking credit is expected to impact bank revenues for years to come. If bank CEOs confirm that to be the case this Friday, additional bank losses could follow.

But until then, CPI anxiety will dictate the market, which should theoretically keep stocks moving sideways unless a major market-wrecking (or market-boosting) headline drops within the next 48 hours.


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