Wall Street cautiously positive, despite the disappointment that came with the publication of JP Morgan’s financial results. The focus of market operators remains on US inflation and therefore on the possible moves of the Fed by Jerome Powell: the acceleration of inflationary pressures was also confirmed today, with the publication of the producer price index, flown on an annual basis in March of 11.2%, from the previous + 10%, and over the + 10.6% estimated by the consensus. At around 4 pm Italian time, the Dow Jones advanced by 0.18% to 34,281 points; the S&P 500 rises by 0.10% to 4,400 points, while the Nasdaq reports a progress of 0.41% to 13,426.
Today’s data relating to the US PPI confirms the most sustained rise in inflation since the US government began disseminating the index, that is, since November 2010.
On a monthly basis, inflation grew by 1.4%, over the estimated + 1.1%.
Core inflation – formerly the prices of energy and food goods – increased at an annual rate of 9.2%, well above the + 8.4% forecast by economists. On a monthly basis, the core PPI rose by 1%, more than the estimated + 0.5%.
Initially, the data triggered US Treasury rates to rise, which they then retraced. At the moment, ten-year rates drop to 2.674%; those in two years retrace to 2.309%, those in 5 years fall to 2.596% and those in 30 years to 2.803%. The interest rate trend confirms that the section of the yield curve between 5 and 30 years, which had reversed in the previous weeks for the first time since 2016, has also returned to normal (rising rates).
The volatility on the US stock market remains very high: yesterday, after the release of the other crucial figure of inflation, that of the consumer price index, Wall Street had pointed decisively upwards.
But after the initial buys, which had led the Nasdaq to jump by around 2%, the US stock market closed the session in the red: the Dow Jones Industrial Average lost 87.72 points (-0.26%) to 34,220.36 . The S&P 500 fell 0.34% to 4,397.45 while the Nasdaq Composite lost 0.3% to 13,371.57.
The CPI (consumer price index) climbed 8.5% yoy in March, at the strongest pace since January 1982. The figure picked up pace from + 7.9% in February, to a rate higher than + 8.4% on an annual basis expected by the consensus of economists. The core component of the consumer price index rose 6.5% on an annual basis, compared to 6.4% in February, but at a slower pace than the + 6.6% estimated by analysts.
On a monthly basis, inflation advanced by 1.2%, as expected, up from the previous + 0.8%. Core inflation, on the other hand, rose by 0.3% on a monthly basis, at a slower pace than the estimated + 0.5% and also decelerating compared to the previous + 0.5%. The rise was also the lowest since September, a factor that initially led investors to hope for a peak in US inflation.
Among other things, the data showed that US inflation-adjusted wages fell by 0.8% on a monthly basis in March, retreating by 2.7% on an annual basis.
But several economists have pointed out that, in order to speak of a peak in inflation, certain preconditions are necessary, such as the fact that there is no further escalation of the war between Russia and Ukraine.
An alert has also arrived in the last few hours from the super hawk James Bullard, president of the Federal Reserve of St. Louis.
Still dissatisfied with the Fed’s hawkish conversion, Bullard went further:
“There is a bit of fantasy – he said – when it comes to neutral rates” (or ‘neutral rate’, the level of rates that neither stimulates nor slows down inflation). “Neutral rates are not sufficient to exert downward pressure on inflation – explained the banker – All they do is stop the upward pressure”. Which means, according to the exponent of the Federal Reserve, that raising the rates on fed funds “to the neutral level will not be enough” to curb the surge in prices in the United States.
Bullard accordingly asked the Fed to raise rates by 300 basis points by the third quarter of this year.
Returning to the corporate front JP Morgan, the number one bank in the United States by asset value, announced that, in the first quarter of 2022, the eps dropped significantly as the consensus had predicted, at an even stronger pace, falling at $ 2.63 compared to $ 4.50 in the first quarter of 2021, below the $ 2.72 per share estimated by economists. The decrease in profit was overall equal to – 42% on an annual basis.
The bank announced a charge of $ 902 million due to provisions made for possible credit losses. Overall, JP Morgan was forced to set aside nearly $ 1.5 billion between assets related to Russia and assets that suffered the consequences of higher inflation.
JP Morgan’s revenue also fell to $ 30.717 billion, roughly in line with consensus estimates of $ 30.59 billion, up from $ 32.27 billion in the first quarter of last year.
“We remain optimistic about the economy, at least in the short term. Household and corporate balance sheets as well as consumer spending remain in good health. But we see several challenges from the economic and geopolitical front, due to high inflation, problems with supply chains and the war in Ukraine “, commented CEO Jamie Dimon. The bank also announced that the board has approved a $ 30 billion share buyback transaction. JP Morgan stock falls by approximately 2.7%.
The markets are looking at the other quarterly reports released by Corporate America: such as that of the airline Delta Air Lines, whose stock jumped by almost 4%, looking at the quarterly loss lower than expected by the group. Delta also announced that, for the first time and in March, monthly revenue was confirmed above pre-Covid-19 pandemic levels for the first time.
Better than expected quarterly also for BlackRock (title up by more than + 1%). The US asset management giant led by Larry Fink closed the first quarter of 2022 with a net profit of 1.44 billion dollars, or 9.35 dollars per share, against 1.2 billion in profits, or 7.77 dollars , a year ago. Adjusted earnings per share (EPS) stood at $ 9.52 versus $ 8.04 in the first quarter of 2021. In the period under review, revenues rose to $ 4.7 billion. The market was expecting an EPS of 8.7 dollars and a turnover of 4.67 billion.