Impact of Upcoming Earnings and Economic Data

Last week, investors’ expanding risk propelled U.S. equity indices 1-3% higher, driven by large-cap technology bursting out of consolidations. The Nasdaq paced the advance, while the S&P 500 scored its 22nd record high of the year. The S&P 500 roared past the 4000 level returning over 2.75%. The index is on its longest weekly winning streak since October of last year.

The VIX, a measure of volatility, slid below 17 to its lowest level since before the pandemic. U.S. Treasury yields were flat as investors weighed better than expected producer inflation versus dovish commentary from Fed. Economic data impressed once again. Producer prices increased well ahead of expectations in March, rising 1% over the prior month. Year over year, producer prices increased 4.2%, which was the largest yearly increase since 2011.

Continued claims, or the number of people receiving unemployment benefits, continued to slowly improve, falling to a one-year low of 3.73 million in the week ending on March 27. That represents a significant improvement from the high of over 23 million reached in May 2020. Another sign housing is affected by the rise in yields, mortgage applications fell 20%.

Earnings and Economic Data Ahead

Earnings season has arrived, and so has critical economic data. The largest financial institutions like J.P. Morgan, Goldman Sachs, and Bank of America will report later in the week. Also this week, investors will weigh the latest consumer inflation data on Tuesday and retail sales on Thursday. Fed chair Powell has repeatedly stated the FOMC believes rising price pressures will only be transitory and the labor market still has significant slack. Thereby they are nowhere close to removing support or changing their dovish stance. Thursday offers plenty of market-moving potential with U.S. retail sales. Retail sales are expected to rebound sharply, as well as weekly unemployment claims. Lastly, Friday’s building permits and housing data will be closely watched. The key is whether the recent weakness tied to rising yields continues to filter through the sector.

Year-to-date index performance; Dow up 10.9%, S&P up 9.9%, and Nasdaq up 7.8% through the close on Friday.

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