Wall Street set for pause as investors prepare for bank earnings, retail sales
NEW YORK (April 14) Wall Street is likely to give back some of Thursday’s strong gains when the market opens on Friday as investors anticipate the first quarterly earnings from some of the largest US financial institutions since the failure of Silicon Valley Bank and Signature Bank in early March, while the latest retail sales numbers will give further insight into the health of the US consumer.
Futures for the Dow Jones Industrial Average (DJIA) declined 0.2% in pre-market trading, while those for the broader S&P 500 index fell 0.3%, and contracts for the Nasdaq-100 shed 0.4%.
The US benchmarks rallied on Thursday after the Producer Price Index (PPI) for March came in lower than expected, boosting hopes that the US Federal Reserve could put a pause on rate hikes next month. That followed Wednesday’s Consumer Price Index (CPI) release which revealed sticky core inflation. The Nasdaq Composite jumped 2% to 12,166, while the DJIA gained 1.1% to 34,030 and the S&P 500 added 1.3% at 4,146.
“Another big fall in US inflation, this time in headline PPI for March as well as core prices is fuelling optimism that we could start to see a similar effect filter down into the CPI numbers in the coming months, thus bringing us closer to possible rate cuts later this year,” commented Michael Hewson, chief market analyst at CMC Markets UK.
He added: “This may well be true, however with the US labour market still holding up reasonably well it’s hard to imagine the Federal Reserve will be in any rush to cut rates while the US economy continues to hold up reasonably well on the jobs front.”
March’s retail sales number also will indicate how consumer sentiment has fared in the wake of the recent banking turmoil, Hewson noted.
“After a strong start to the year US retail sales stalled in February slipping -0.4%, in the aftermath of the 3.2% surge seen in January. Personal spending also saw a similar slowdown in the same months, slowing from 2% in January to 0.2% in February.
“With all the concerns over bank runs in the US during March and consumers shifting their funds from smaller US banks to the biggest ones, consumer confidence managed to hold up pretty well. That doesn’t necessarily mean that we’ll see a similar pickup in retail sales. Expectations are for another weak reading of -0.4%," he said
“The bigger test, however, will be in how the US banks fared in Q1 and more importantly, how lending to US businesses and consumers held up during what was a turbulent quarter for the sector,” Hewson concluded.
JP Morgan’s earnings are seen as a bellwether for the broader financial sector and on the back of recent banking stress in the US, today’s results will be closely watched, commented TickMill Group market analyst James Harte.
“In terms of headline figures, Wall Street is looking for EPS of $3.41 on revenues of $36.125 billion. This would mark a slight uptick in revenues, though a mild drop in earnings,” Harte said.
Reuters
