Here Comes Earnings Season
The S&P 500 rose last week by +.8% stretching YTD 2022 gains to +7.8%, but still -13.7% from early 2022 all-time highs. Global equities have outperformed US markets year to date on the back of a lower trending dollar. European equities rose +2.5% last week and are now up over +13.5% YTD. The Japan markets rose +1.5% last week and are up 4.4% for the month. High yield corporate credit spreads narrowed sharply last week. Tighter bond spreads have been historically good for stocks.
The cash S&P 500 ended Friday at 4137.6, up from the prior Fridays close at 4105. Last week’s increase came as 1Q23 earnings from banks including JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) surpassed analysts’ estimates (which had been cut into the reports) on Friday. The week’s advance was led by oversold cyclical sectors with a +2.9% advance in materials, a 2.5% rise in energy and a 2.1% increase in industrials. Other gains were seen in consumer discretionary, health care and communication services. Real estate led to the downside with a -1.5% drop. Technology and consumer staples also declined slightly. The Nasdaq 100 has lagged the S&P 500 for three consecutive weeks after beating in 9 of the previous 11. This has come as “real interest rates” have sold off (higher rates) the last 3 weeks.
JPMorgan Chase rose +8.8%, on the bank’s stronger-than-expected Q1 results. Citigroup shares were also strong, rising +8.1% on the week. Gains in energy included shares of APA Corp. (APA), which rose 7.1%. Gains in the industrial sector included shares of United Rentals (URI), which climbed 6.4%. On the downside, the declines in real estate included Crown Castle (CCI), falling -3.8%.
This week’s earnings calendar includes Charles Schwab (SCHW), Johnson & Johnson (JNJ), Bank of America (BAC), Netflix (NFLX), Goldman Sachs Group (GS), United Airlines (UAL), Tesla (TSLA), Abbott Laboratories (ABT), International Business Machines (IBM), Philip Morris International (PM), AT&T (T), Union Pacific (UNP), American Express (AXP) and Procter & Gamble (PG).
Last week’s economic data showed the US producer price index falling -0.5% last month, marking a drop as the consensus was for the index to remain unchanged in March following a flat reading for February. The PPI rose +2.7% annually, the smallest gain since January 2021. Additionally last Wednesday, the consumer price index rose by only 0.1% in March. This was smaller than the 0.2% increase that was expected and smaller than February’s 0.4% gain.
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4/14/2023: Stock Talk – Grilling Your Portfolio Manager, https://www.youtube.com/watch?v=TXOMHHWXleg
