Markets Flat Ahead of CPI, Q1 Earnings

Monday, April 8th, 2024

We continue to tiptoe through the early trading days of calendar Q2. Currently, we are only a couple sessions from the informal beginning to Q1 earnings season — with Delta DAL, CarMax KMX, Fastenal FAST and Constellation Brands STZ, among others, reporting on Wednesday — and today was a perfect illustration of the reluctance to take indices either up or down. The Dow closed -0.03%, the S&P 500 was -0.04%, the Nasdaq +0.05% and the small-cap Russell 2000 +0.60%.

This was also the first trading day after jobs numbers on Friday came out. We may look at our current market conditions as taking a breather between the Jobs Week just passed and inflation metrics from Consumer Price Index (CPI) and Producer Price Index (PPI) reports on Wednesday and Thursday, respectively. Thus, a flat trading session today, and not much pushing or pulling valuations for Tuesday either. The Dow and the small-cap Russell are both down more than -2% in just the past six trading sessions so far in Q2, with the Nasdaq and S&P just above or below -1%.

Both CPI and PPI numbers will carry plenty of importance. However, they are mere snapshots of inflation levels and the consumer’s appetite for paying up for goods and services. We have seen elsewhere that signs of strain among consumers has begun to take hold after a couple years of notably high price points, and this week’s figures may confirm those earlier findings. If they do, it will be a sign of a weakening economy, but would help solidify the Fed’s decision to lower interest rates beginning in June, as expected.

Earnings reports will also be very important. This is especially true of forward guidance, in that it looks toward future business conditions, which will in turn give investors as well as the Fed a glimpse into the strength of the economy as of mid-2024 and beyond. Considering that most publicly traded companies have a good system for underpromising and overdelivering numbers for a given quarterly statement, guidance will be even more crucial as market participants are able to assess the strength of the economy going forward, before companies can game their own expectations.

In short, don’t expect our present hesitation to last very long. We can take some solace in the lack of market turbulence, although soon enough we’ll see which direction the markets want to head. Historically, of course, we don’t tend to see +10% market gains every quarter, so that might be a little much to expect. That said, as long as we see the Fed’s dot-plot play out in real time, the closer we’ll get to an optimal “soft landing” in the economy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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