U.S. stocks post modest gains early Wednesday in wake of latest inflation data

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U.S. stock index futures tiptoed higher early Wednesday, shaking off premarket weakness seen after disappointing earnings from JPMorgan Chase & Co., as investors also weighed data showing wholesale inflation continues to run hot.

Stock-market bulls are looking for corporate earnings reports to take the focus away from the surge in inflation that has ratcheted up Federal Reserve interest rate-hike expectations and has sent Treasury yields sharply higher so far this year.

What’s happening
  • The Dow Jones Industrial Average DJIA, +0.02% was up 70 points, or 0.2%, at 34,290.
  • The S&P 500 SPX, +0.01% rose 8 points, or 0.2%, to 4,406.
  • The Nasdaq Composite COMP, +0.53% gained 35 points, or 0.3%, to 13,406.

On Tuesday, the Dow, S&P 500 and Nasdaq Composite erased strong early gains to end lower.

What’s driving markets

First-quarter earnings season was underway as investors digested results from JPMorgan Chase & Co. JPM, -2.64%, as well as Delta Air Lines Inc. DAL, +4.95%, BlackRock Inc. BLK, +0.00%, and others.

JPMorgan Chase shares fell 2.5% to lead Dow decliners after the bank reported lower first-quarter profit that missed Wall Street’s estimate, and cast some gloom on the financial sector.

“JP Morgan’s Q1 earnings are the fairly dull bookend to a golden two-year period in banking,”  said Octavio Marenzi, CEO of Opimas LLC, a capital markets consulting firm, in emailed comments.

“During the pandemic, [return on equity] hovered close to 20%. Investment banking and trading did magnificently well, while loan losses remained extremely low. Now, with rising interest rates, JP Morgan’s earnings got clobbered, falling by over 40%. This is going to be the new normal in banking for the foreseeable future,” he said.

Meanwhile, Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, noted that consensus earnings expectations for the S&P 500 this year have actually moved higher, to $230 in April from $224 in January.

“Given the myriad headwinds faced by companies in the first quarter and the year ahead, we think first-quarter reporting season has the potential to be a mess. But we also see the potential for it to not be as bad as feared, given the likelihood that buy-side expectations are much lower than official sell-side forecasts – as long as robust assessments of underlying appetite/demand remain in place,” she said.

Overseas developments meanwhile brought the inflation and rate hike stories back into focus. The U.K. reported the fastest inflation rate in 30 years, and the Reserve Bank of New Zealand made a bigger-than-forecast half percentage point interest rate hike. The Bank of Canada also is expected to lift rates by a half-point later Wednesday.

The U.S. producer price index, which measures the cost of wholesale goods and services, jumped 1.4% in March largely because of higher gas and food prices, signaling that U.S. inflation is likely to stay near a 40-year high through the spring. Economists polled by The Wall Street Journal had forecast a 1.1% gain. The increase in wholesale prices over the past year jumped to 11.2%, from 10% in the prior month — the highest level since the early 1980s.

The PPI reading comes a day after the Labor Department reported the strongest year-over-year rise in U.S. consumer prices in 40 years, at 8.5%.

The CPI data showed a 0.9% drop in durable-goods inflation, at the same time there was a 0.7% gain in services inflation, both evidence of a normalizing economy after pandemic supply disruptions.

“These core inflation dynamics suggest that underlying price pressures are peaking in the U.S.,” said analysts at BCA Research.

Companies in focus
How other assets are trading
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 2.682% fell 3.9 basis points to 2.687%. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index DXY, +0.16%, a measure of the currency against a basket of six major rivals, was up 0.2%.
  • Bitcoin BTCUSD, +2.48% fell 0.8% to trade back below $40,000.
  • Oil futures extended a rebound to push the U.S. benchmark CL.1, +1.37% up 1.8% to trade above $102 a barrel. Gold futures GC00, +0.19% were up 0.3% at nearly $1,982 an ounce, on track for a fifth straight daily gain.
  • The Stoxx Europe 600 SXXP, -0.20% fell 0.4%, while London’s FTSE 100 UKX, -0.12% was off 0.2%.
  • The Shanghai Composite SHCOMP, -0.82% fell 0.8%, while the Hang Seng Index HSI, +0.26% rose 0.3% in Hong Kong and Japan’s Nikkei 225 NIK, +1.93% jumped 1.9%.

This article was originally published by Marketwatch.com. Read the original article here.

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