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Weekly Market Update for April 14, 2022

by Jared Plotz

Markets ended another week lower as elevated inflation and rising interest rates overshadowed solid earnings metrics from early reporters. Mostly, the holiday-shortened week was devoid of bullish talking points and the risk of a protracted war in Ukraine doesn’t lend to optimism either. The S&P 500 closed 2.1% lower while the NASDAQ fell 2.6% this week.

Inflation remains front and center.  The Consumer Price Index (CPI) rose 8.5% vs. the prior year in March, though 6.5% when excluding food & energy (aka Core). This is the highest since 1981. While CPI was largely as expected, the Producer Price index rose 11.2%, or 9.2% on a Core basis. This drove a further lift in interest rates, with the 10-yr Treasury rising to 2.83%.  March retail sales remained robust as pent-up demand has driven elevated spending and consumers have yet to show price sensitivity. Consumer and investor confidence remains low, with uncertainty hitting sentiment readings. Ironically, low confidence is typically viewed as a bullish signal for future market returns.

Earnings reports thus far have generally demonstrated revenue upside, albeit with softer margins. Most big banks reported better-than-expected Q1 results: beating on revenues, seeing a bump in trading activity due to heightened global volatility, and continuing to buy back shares.  Credit quality was good; however, some took markdowns due to Russia-associated counterparties or built reserves given geopolitical and market risks. Delta Airlines arguably provided the most upbeat commentary, noting a rapid recovery in travel demand (including corporate demand) post-Omicron that has offset higher fuel prices.

Next week we will get the last of the big bank reports with Bank of America on Monday.  Then the regional banks, transports, and chemical companies are next on the docket.  Economic data will be bit scant with housing data (existing sales & new housing starts) the most notable to watch.

The markets, and our offices, are closed tomorrow in observance of Good Friday.  It is snowing in Minnesota, but hopefully many of you have better weather this weekend!

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