Stock Market Update

[BRIEFING.COM] It took a little bit, but the stock market finally found some footing and managed to put together a nice rebound effort on the heels of Thursday's broad-based losses, wrapping up what can best be described as a frenetic  week of trading.

Today's action began on a soft note despite some better-than-expected Q1 earnings results from JPMorgan Chase (JPM 236.20, +7.78, +3.4%), Wells Fargo (WFC 62.51, -2.85, -4.5%), Morgan Stanley (MS 108.12, -1.49, -1.4%), BlackRock (BLK 878.78, +7.16, +0.8%), and Bank of New York Mellon (BK 77.67, +1.06, +1.4%). Market participants were pre-occupied with the ongoing weakness in the dollar, rising Treasury yields, a dour consumer sentiment reading for the month of April that saw the highest year-ahead inflation expectations (6.7%) since November 1981, and China countering the U.S's 145% tariff rate on imports from China with a 125% tariff rate on imports from the U.S.

For good measure, China added that it will be ignoring any further tariff actions by the U.S.

Those issues notwithstanding, stocks regrouped around mid-morning and continued on a higher path into the close. That regrouping coincided with the 10-yr note yield backing down from a high of 4.58% to 4.45%. It settled the session up 10 basis points at 4.49%.

Other supportive influences included the leadership of the mega-cap stocks, a reiteration by the White House Press Secretary that the president hopes to make a deal with China, and an FT report that suggested the Fed stands ready to stabilize financial markets if conditions become disorderly. The latter two items, while largely known, were market-friendly reminders that the "Trump put" and the "Fed put" are still on the table.

The major indices settled the session at, or near, their highs for the day. Notably, the Russell 2000 overcame an early 1.6% decline to finish with a 1.6% gain. That trailed the market cap-weighted S&P 500 (+1.8%) but was slightly ahead of the 1.5% gain logged by the equal-weighted S&P 500.

While the mega-cap stocks were an influential source of support throughout the session, buying interest turned into a broad-based affair as the session carried on. All 11 S&P 500 sectors finished with a gain of at least 1.1%. The biggest winners were the materials (+3.0%), information technology (+2.6%), and energy (+2.5%) sectors.

Market breadth reflected the positive turn. Advancers led decliners by a better than 2-to-1 margin at the NYSE and by a 2-to-1 margin at the Nasdaq.

• Dow Jones Industrial Average: -5.3% YTD
• S&P 500: -8.8% YTD
• S&P Midcap 400: -12.8% YTD
• Nasdaq Composite: -13.4% YTD
• Russell 2000: -16.6% YTD

Reviewing today's economic data:

• The Producer Price Index for final demand decreased 0.4% month-over-month in March (Briefing.com consensus 0.1%) following an upwardly revised 0.1% increase (from 0.0%) in February. The Core Producer Price Index for final demand, which excludes food and energy, decreased 0.1% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.1% increase (from -0.1%) in February. On a year-over-year basis, the index for final demand was up 2.7% versus 3.2% in February, and the index for final demand, less food and energy, was up 3.3% versus 3.5% in February.
  • The key takeaway from the report is that inflation for wholesalers was suppressed in March; however, that good news is being discounted as temporary (like yesterday's CPI report was) given that tariff actions are taking root in supply chains and are expected to lead to higher prices at least in the short term.
• The preliminary April Univ. of Michigan Index of Consumer Sentiment checked in at 50.8 (Briefing.com consensus 54.8) versus the final reading of 57.0 for March. In the same period a year ago, the index stood at 77.2.
  • The key takeaway from the report is manifold: the decline in consumer sentiment is broad-based; expectations for unemployment to rise are at their highest since 2009; and inflation expectations are surging. This is a terrible mix that will foment concerns about future consumer spending strength.