Inflation and bank earnings: 4/10/2023 - 4/14/2023
Results from big banks will usher in a first-quarter earnings season as investors again believe the end of the Federal Reserve's rate hiking cycle is right around the corner.
Markets
Dow Jones: 33,485.29 (+0.0077%) 📈
S&P 500: 4,105.02 (+0.36%) 📈
Nasdaq: 12,087.96 (+0.76%) 📈
Russell: 1,754.46 (+0.13%) 📈
VIX: 18.40 (-3.56%) 📉
*Stock numbers as of market close on April 6th
First-quarter earnings season will get underway this week, with big banks reporting results on Friday as investors turn their attention slightly away from Fed policy and towards the state of play in corporate America.
Some of America's largest financial institutions will report results before the market opens on Friday, including JPMorgan JPM 0.00%↑, Wells Fargo WFC 0.00%↑, Citi C 0.00%↑, and BlackRock BLK 0.00%↑. Also featuring on the weekly schedule will be Wednesday morning's inflation reading from the Consumer Price Index (CPI) and the monthly retail sales report out Friday morning.
Last week, markets were little changed during a holiday-shortened trading week with U.S. markets closed for Good Friday. The Dow rose about 0.7% while the S&P 500 was fractionally lower and the Nasdaq fell about 1%.
The main event last week came with markets closed on Friday as the March jobs report showed hiring slowed in the U.S. economy last month, though likely not by enough to forestall another rate hike from the Federal Reserve next month.
Data from the Bureau of Labor Statistics showed there were 236,000 jobs added to the economy last month while the unemployment rate fell to 3.5%.
Wall Street economists largely agreed on Friday that another 0.25% increase in the Fed's benchmark interest rate is likely coming on May 3rd but that this would be the final rate hike of the current cycle.
"Overall the March jobs numbers still indicate that labor markets are developing the way the Fed would like, though perhaps not quite quickly enough," said Theodore Littleton, senior economist at IFR Markets.
"It certainly doesn't dissuade the FOMC from getting in at least one last rate hike, with wage gains lower but still running at a rate that they don't consider consistent with their overall inflation target."
Data from the CME Group showed Friday that investors are placing a roughly 70% chance on the Fed raising rates next month.
Key to this calculation, of course, will be Wednesday's CPI data, which is expected to show headline inflation rose 0.2% over the last month and 5.2% over the last year in March, an increase that would mark the slowest pace of consumer price increases since August 2021.
On a "core" basis, which strips out the more volatile costs of food and energy, prices are expected to rise 0.4% over the prior month and 5.6% over last year in March.
This would mark the first time since January 2021 that "core" inflation rose more against the prior year than the headline reading.
A persistent rise in the cost of shelter, which rose 8.1% over the last year in February, has kept core inflation elevated. In a press conference last month, Fed Chair Jerome Powell said inflation in the housing market coming down — which has largely been driven by rent renewals from a year ago — "is really a matter of time passing."
"We forecast that next week's CPI report will show only modest deceleration," wrote Barclays economists led by Marc Giannoni.
On the earnings side, all eyes will be on how ripples from the collapse of Silicon Valley Bank and Signature Bank last month impacted the country's biggest banks.
In recent weeks, smaller regional banks like Western Alliance WAL 0.00%↑ and First Republic FRC 0.00%↑ have sought to calm investor nerves by offering updates on any deposit outflows. JPMorgan, Citi, and Wells Fargo were part of a consortium last month that injected some $30 billion in deposits into the First Republic to shore up the struggling lender.
Last week, data from the Federal Reserve showed another $65 billion in deposits left the U.S. banking system, with Bloomberg's Alex Tanzi noting most of this decline came from large banks. In each of the prior two weeks, some $120 billion flowed out of small banks while some $126 billion left the overall banking system during the week ended March 22.
In his annual letter to shareholders published last week, JPMorgan CEO Jamie Dimon wrote: "As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come."
Dimon noted that while these events have been challenging, they are "nothing" like what happened in 2008. But avoiding a 2008-like scenario, in Dimon's view, does not make this bank crisis a good thing by any means.
"Any crisis that damages Americans' trust in their banks damages all banks — a fact that was known even before this crisis," Dimon wrote.
"While it is true that this bank crisis 'benefited' larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd."
Events Calendar
Monday, April 10
Tuesday, April 11
Wednesday, April 12
Thursday, April 13
Friday, April 14
Key Takeaways:
Earnings season kicks off next week with reports from big banks and financial institutions, including JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, and PNC Financial Services.
Other companies scheduled to report earnings include Progressive Insurance, Delta Air Lines, and UnitedHealth Group, among others.
The latest inflation reports will become available with the March Consumer Price Index (CPI) and Producer Price Index (PPI) on Wednesday and Thursday, respectively.
On Friday, the U.S. Census Bureau will report on March retail sales, providing a timely update on consumer spending.
Starting Monday, the International Monetary Fund (IMF) and World Bank will hold their Spring 2023 annual meetings in Washington, D.C.
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Thank You Akash, that was helpfull as to the numbers on unempolyment. and T. Y. for your time dear Sir, Hope all`s well for you and you`res.
Well, sorry I do question as to numbers and "IF" they are true numbers. I state one has to know, and yes Feds job as to holding bank accountable as to keeping save deposets on hand. I going back in time, thought of 14% in resever for banks was a safe line. BUT, as we seen like in the housing bust, banks did Manipulate their numbers.
So, do we have, to the general Public and markets as to "True Numbers?
Other and no I have not been keeping good track of this, BUT, How and if so, We got 3.5 unempolyment, and still month after month increase in new job numbers. POINT, were we at 3.5% 6 months ago?
As to J. Dimon of Chase Bank, Do You trust anything he`s got to say?
Thank You, Akash for your work and news letters.
My Name is NoBody, (1vs160)