Inflation remains the focus on market direction Wednesday ahead of PPI data for March as first quarter earnings begin to trickle-in.
U.S. equity futures moved higher Wednesday, while Treasury bond yields inched further north and the dollar consolidated gains against its global peers, as investors looked to the unofficial start of the first quarter earnings season to drive momentum for stocks in the face of accelerating inflation pressures.
JPMorgan Chase (JPM) – Get JPMorgan Chase & Co. Report lead a parade of bank earnings this week with its March quarter profit report prior to the start of trading, with Delta Air Lines DAL also providing an early look into the impact of higher fuel prices on the still-recovering airline industry.
JPMorgan actually missed Street forecasts, with a bottom line of $2.63 per share, as it set aside $902 million in reserves against bad loans and credit losses linked to both surging domestic inflation and the Russia’s war on Ukraine.
Delta Air Lines shares surged nearly 7% after the carrier posted a narrower-than-expected first quarter loss, with a big boost in revenues, thanks to what it called a “strong rebound in travel demand” as the Omicron infection wave faded over the final month of the period.
S&P 500 companies are expected to see collective profits grow 6.1% from last year to a share-weighted total of $432.2 billion, according to Refinitiv data, a pace that would be down sharply from the 32.1% clip recoded over the final three months of last year.
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That could provide investors with some weaponry to fight the onslaught of faster inflation — and the hawkish central banks moves that come with it — following the fastest annual CPI reading in more than 40 year last month in the United States and the biggest month-on-month change in the U.K. since records began in 1988.
Yesterday’s inflation data also clipped demand for the U.S. Treasury’s $34 billion auction in 10-year notes, where the so-called bid-to-cover ratio fell firmly below the recent average, even as yields on the sale rose to 2.72%. The notes were last seen trading at 2.723% ahead of a March reading of producer prices at 8:30 am Eastern time.
Interest rate traders are still pricing in three consecutive 50 basis point rate hikes from the Fed following yesterday’s CPI data, pushing the dollar index, which tracks the greenback against a basket of six major global currencies, to another fresh two-year high of 100.37 in overnight trading.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 160 point opening bell gain while those linked the S&P 500, which is down 2.9% for the month, are priced for a 17 point advance. Futures linked to the tech-focused Nasdaq are looking at a 105 point opening bell move to the upside.
Twitter (TWTR) – Get Twitter, Inc. Report shares were again in focus amid reports that Tesla (TSLA) – Get Tesla Inc Report CEO Elon Musk will face a lawsuit from former shareholders over his stake-building in the social media website and comments from star fund manager Cathie Wood that she’s been “cutting back” on her holdings since the departure of former CEO Jack Dorsey
PayPal Holding (PYPL) – Get PayPal Holdings, Inc. Report shares, meanwhile, moved 3.7% lower after the payments group said CFO John Rainey would be leaving the company after seven years to take on the chief financing role at retailing giant Walmart (WMT) – Get Walmart Inc. Report.
