Stocks wobble as big week for inflation data, earnings begins

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By journalsofus.com


US stocks wobbled on Monday as investors kicked off a big week that will see a fresh inflation data test for rate-cut views and the start of first-quarter earnings season.

The Dow Jones Industrial Average (^DJI), the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) wavered around the flatline after opening with slight gains.

A strong jobs report helped lift stocks on Friday but couldn’t fend off weekly losses as doubts about the Federal Reserve’s resolve for interest-rate cuts preyed on minds.

US bonds sold off last week amid that uncertainty, and the pressure continued Monday with a slight rise in the 10-year Treasury yield (^TNX) to above 4.45%. While the benchmark has pared gains, it is still within reach of the key 4.5% level seen by some as a potential tipping point for a run-up toward last year’s highs.

Other concerns added to the unsettled mood: Divided views on policy from Fed speakers, growing noise around the coming US presidential election, and a spike in oil prices from escalating Middle East tensions that could fan inflation pressures.

All that is sharpening focus on the release of the Consumer Price Index on Wednesday, a key input in the Fed’s decision making and a clue to continuing resilience in the US economy. Investors will watch for signs that inflation returned to its downward trend in March after signs of stickiness in readings earlier this year.

At the same time, the market is bracing for the new earnings season, with Delta Air Lines (DAL) setting the stage on Wednesday for big banks’ results on Friday. Broadly, Wall Street expects the first quarter to set the tone for a robust year of earnings growth among S&P 500 companies, hopes boosted by the blowout March labor figures.

Against that backdrop, gold rose above $2,350 an ounce to touch a fresh record. Meanwhile, oil was reaching for recent multimonth highs as the market assessed easing tensions in the Middle East. Brent crude futures (BZ=F) were slightly lower near $89 a barrel, while West Texas Intermediate futures (CL=F) were a touch higher at just below $86.

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  • Trending tickers on Monday

    Bitcoin (BTC-USD)

    Bitcoin rose to trade back above $71,700 per token on Monday. The rise comes ahead of the cryptocurrency’s reward halving expected later this month.

    Bitcoin is up more than 60% year-to-date.

    Coinbase (COIN)

    Shares of the cryptocurrency exchange are popping thanks to the rise in bitcoin. Analysts at Barclays also raised their price target on Coinbase to $179 from $146, though still maintaining an Underweight rating on the stock.

    Coinbase is up more than 60% year-to-date.

    Boeing (BA)

    The industrial giant is under the microscope again. This time because of an engine cover which blew off a Boeing 737-800. The Federal Aviation Administration is investigating the Sunday incident during a Southwest Airlines (LUV) flight from Denver to Houston.

    Boeing has faced a string of challenges stemming from an accident involving a door “plug” on an Alaska 737 Max-9 flight on Jan. 5.

  • Trump Media stock slips 10%

    Trump Media & Technology Group (DJT), the parent company of Donald Trump’s social media platform Truth Social, tanked roughly 10% Monday despite a recent media appearance by CEO Devin Nunes defending the company’s profitability.

    At current trading levels of about $36.55 a share, Trump Media boasts a market cap of roughly $4.9 billion, giving the former president a stake worth around $2.8 billion. After the company’s public blockbuster debut on March 27, Trump’s stake was worth just over $4.5 billion.

    One week ago the stock tanked after an updated regulatory filing showed the company took on heavy losses and faced “greater risks” associated with the former president’s ties to the platform.

    Monday’s loss came on the heels of a 12% drop last Friday.

    Trump Media went public on the Nasdaq after merging with special purpose acquisition company Digital World Acquisition Corp. in a deal approved by shareholders late last month.

    The former president founded Truth Social after he was kicked off major social media apps like Facebook and Twitter, the platform now known as X, following the Jan. 6 Capitol riots in 2021. Trump has since been reinstated on those platforms.

    Last week’s filing also revealed stakeholders are still subject to a six-month lockup period before selling or transferring shares.

    The opportunity to cash in by selling some of his stake in the company could help Trump as he faces a $454 million fraud penalty and grapples with a campaign fundraising shortfall ahead of his 2024 election rematch against Biden. Trump recently posted a $175 million bond in the fraud case, which puts the final payment on hold while he appeals the verdict.

    The only exception to the lockup period would be if the company’s board votes to make a special dispensation. Although possible, experts told Yahoo Finance last month the attempt would likely result in multiple lawsuits on behalf of public shareholders.

  • Oil futures pull back amid signs of easing Middle East tensions

    Oil futures pulled back roughly 1% on Monday amid some signs of easing tensions in the Middle East.

    West Texas Intermediate (CL=F) futures were trading above $85 while Brent (BZ=F) traded around the $90 level after Israel agreed to remove some ground troops from the southern Gaza area.

    “Still, the growing demand picture remains a tailwind for crude,” Dennis Kissler, senior vice president at BOK Financial, said in a note on Monday.

    The analyst noted oil has risen by roughly $7.00 in the last two weeks.

    “Caution is warranted as the ‘overbought’ condition is also carrying heavy fund long positions that may have pushed up prices a bit too much too fast,” wrote Kissler.

    WTI has risen roughly 16% year to date. Brent climbed 15% during the same period.

  • Amazon stock hovers around all-time closing high

    Amazon’s (AMZN) shares rose on Monday, briefly surpassing their 2021 all-time closing high of $186.57.

    The stock rose after Morgan Stanley analyst Brian Nowak lifted his price target on Amazon to $215 from $200. Shares rose over the past year as the company has been cost-cutting in many areas of its business — from cloud services giant Amazon Web Services to the e-commerce titan’s retail footprint.

    The stock is up roughly 22% year to-date.

  • Stocks inch higher, inflation data on deck this week

    Stocks inched higher at the open on Monday as investors await fresh inflation data later this week. The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) rose slightly. The tech-heavy Nasdaq Composite (^IXIC) rose 0.3%.

    A fresh Consumer Price Index report due out on Wednesday may give investors clues about the Federal Reserve’s resolve for interest rate cuts this year. A strong monthly jobs report helped lift stocks on Friday but equities were still down for the week amid worries that Fed officials may delay rate reductions.

    This week JPMorgan (JPM), Wells Fargo (WFC), BlackRock (BLK), and Citi (C) are all set to report earnings, along with Delta Air Lines (DAL).

  • Disney’s potential lift from password sharing crackdown

    Disney (DIS) has a lot of password sharers to crack down on.

    The media giant is expected to begin tightening the grips on password sharing for Disney+ and Hulu this June, teased CEO Bob Iger in a Friday TV interview.

    A new chart from Evercore ISI analyst Vijay Jayant (below) sheds light on how impactful a password-sharing crackdown could be to the streaming division’s profitability.

    Disney will follow Netflix and crack down on password sharing.

    Disney will follow Netflix and crack down on password sharing. (EvercoreISI)

  • Jamie Dimon on why the number of public companies continues to shrink

    The golden nuggets for investors from Jamie Dimon’s latest annual letter today continues on page 35.

    The JPMorgan (JPM) boss pointed out the “diminishing role of public companies in the American financial system,” as seen in the number of US public companies sitting at 4,300. In 1996, that number stood at 7,300.

    Conversely, the number of US private companies backed by private equity firms has surged to 11,200 from 1,900 over the last two decades, noted Dimon.

    “This trend is serious and may very well increase with more regulation and litigation coming. Along with a frank assessment of the regulation landscape, we really need to consider: Is this the outcome we want?” Dimon wrote.

    Dimon calls out several factors for this disparity:

    • Intensified reporting requirements (see ESG).

    • Higher litigation expenses.

    • Costly regulations.

    • “Cookie-cutter” board governance.

    • Shareholder activism.

    • Less capital flexibility.

    • Heightened public scrutiny.

    • “Relentless pressure” of quarterly earnings.

    I do wonder, however, if fewer public companies has been the driver of higher stock prices since Dimon took over as CEO in the early 2000s. Less supply of assets, more competition for those assets — no?

  • Dimon succession watchers may feast on this one

    Count me as very fascinated by what JPMorgan (JPM) is working on in the field of artificial intelligence.

    Dimon said in his annual letter today the company now has 2,000 AI/machine learning experts and data scientists. He added the company has 400 use cases in production in areas such as marketing, fraud, and risk — and they are “increasingly driving retail business value across our businesses and functions.”

    I am equally fascinated by Dimon dropping COO Daniel Pinto’s name (who has long been seen as a Dimon successor) into his important comments on AI. Dimon views AI as so mission critical to JPM’s future success, he has created a new role called the chief data and analytics officer. This role sits on the company’s operating committee and reports directly to Dimon and Pinto.

    Said Dimon:

    “Elevating this new role to the operating committee level — reporting directly to Daniel Pinto and me — reflects how critical this function will be going forward and how seriously we expect AI to influence our business. This will embed data and analytics into our decision making at every level of the company. The primary focus is not just on the technical aspects of AI but also on how all management can — and should — use it. Each of our lines of business has corresponding data and analytics roles so we can share best practices, develop reusable solutions that solve multiple business problems, and continuously learn and improve as the future of AI unfolds.”

  • JPMorgan CEO Jamie Dimon’s master class in making money, in one chart

    Want to know why JPMorgan (JPM) investors hope Jamie Dimon stays CEO for 50 more years?

    Sure, the guy is the face of banking with the best relationships in the game, but at the end of the day — he just knows how to make lots of money for shareholders.

    That’s perfectly captured in Dimon’s annual letter out this morning. Check out this chart on page 8, showing how JPMorgan’s net income has grown by about six times since 2005.

    The money machine that is JP Morgan.

    The money machine that is JPMorgan. (JP Morgan)

  • Here’s Jamie Dimon’s latest thinking on where interest rates may go

    JPMorgan (JPM) CEO Jamie Dimon just dropped his latest annual letter to shareholders. You can read it here in full. Yahoo Finance’s David Hollerith provides analysis of the letter here.

    Dimon doesn’t waste any time weighing in on the outlook for interest rates, seemingly echoing what we have heard from some hawkish FOMC members (which has pressured stocks) in recent weeks, emphasis mine:

    “In spite of the unsettling landscape, including last year’s regional bank turmoil, the U.S. economy continues to be resilient, with consumers still spending, and the markets currently expect a soft landing. It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. There is also a growing need for increased spending as we continue transitioning to a greener economy, restructuring global supply chains, boosting military expenditure and battling rising healthcare costs. This may lead to stickier inflation and higher rates than markets expect.

    “Furthermore, there are downside risks to watch. Quantitative tightening is draining more than $900 billion in liquidity from the system annually — and we have never truly experienced the full effect of quantitative tightening on this scale. Plus the ongoing wars in Ukraine and the Middle East continue to have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost. These significant and somewhat unprecedented forces cause us to remain cautious.”

    Interestingly, JPMorgan strategists said this morning they see bond yields going lower:

    “With respect to bond yields’ direction, our call last October was to go long duration, that bond yields have likely peaked. After the year to date bounceback, we think that yields will resume moving lower. Our fixed income team forecasts that US and German 10-year yields will be below current on 3-, 6- and 9-month horizons. We fundamentally agree with this, especially given the elevated geopolitical risks at present, but note the risks of inflation staying too hot.”

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