The stock market rally continue to struggle, especially growth. The Nasdaq composite and S&P 500 retreated, falling below key levels. The Dow Jones was little changed while the small-cap Russell 2000 climbed. New reports showed hot inflation, though there were some indicators that it might be peaking. Fed officials signaled aggressive action for now. Delta Air Lines earnings and guidance lifted travel stocks. UnitedHealth and Taiwan Semiconductor also beat views. JPMorgan Chase results were mixed, but several other big banks topped views. Tesla CEO Elon Musk offered to buy out Twitter.
Market Action Choppy, Weak
The stock market rally show split, generally negative action, especially on the Nasdaq. Energy and commodity stocks continued to look strong, along with medicals and defense firms. Travel stocks soared on Delta Air Lines earnings. UnitedHealth started health insurance earnings off with solid results. Bank earnings were mixed. Treasury yields actually dipped on key inflation reports, but rose to fresh three-year highs for the week. Crude oil prices rebounded.
Inflation Soars; Is This The Peak?
The first inflation reports reflecting a full month of Russia-Ukraine price pressures offered mixed news. The CPI inflation rate rose to a new 40-year-high of 8.5% in March, fueled by energy and food price increases. However, the core CPI inflation rate ex food and energy rose less than expected, with a 0.3% monthly gain, as used car prices fell 3.8%. Travel-related costs jumped, with airfares up 10.7% on the month. Still, the inflation rate has likely peaked. Starting with April data, sharp increases from last spring will no longer factor into the annual inflation rate. Gasoline prices are down somewhat so far in April vs. March. However, the producer price index report showed the wholesale inflation rate hitting a higher-than-expected 11.2%. Import and export prices also pointed to sustained price pressure. Despite a somewhat better picture for core inflation, the Federal Reserve intends to hike as fast as it can, after giving inflation pressures a big head start.
The latest data offer some encouraging signs that the economy can withstand higher rates. Jobless claims, though rising 18,000 in the week through April 9, remain historically very low at 185,000. Retail sales rose 0.2% excluding autos and gasoline. With more spending on travel and services, the consumer seems to be hanging tough.
Elon Musk Offers To Buy Twitter
Tesla CEO Elon Musk offered to buy Twitter with what he said was a take-it-or-leave it offer of $54.20 a share in cash, about $43 billion. Musk said he wants to take Twitter private and will reconsider his 9.1% stake if the offer is not accepted. He said he had "no confidence" in company management. Twitter stock, which already surged on that 9.1% stake disclosure on April 4, initially jumped on the buyout offer but then erased gains.
Delta: Travelers OK With Fares
Delta Air Lines and other airline stocks — along with other travel plays — rallied after the carrier reported better-than-expected first-quarter results. Strong demand and higher fares helped beat back the impact of higher fuel costs following Russia's invasion of Ukraine. The carrier said it hadn't seen any passenger resistance to those prices and noted strong demand for premium seating amid broader concerns about inflation. And the company said it would be "nimble" in the way it managed schedules for available flights, as fuel prices run higher.
JPMorgan Sees 'Significant' Risks
JPMorgan Chase reported mixed first-quarter results Wednesday, and warned of "significant geopolitical and economic challenges" ahead as Russia's war against Ukraine continues. CEO Jamie Dimon downplayed the prospect of a U.S. recession this year. But the bank said market impact of the invasion had cut into its profit, as it set aside more money to cover inflation risks. Citigroup beat views, but set aside $1.9 billion to cover potentially souring credit related to Russia. Goldman Sachs also beat expectations, with a bump in fixed-income trading counterbalancing a drop in equities and investment banking. Rival investment bank Morgan Stanley also topped. Wells Fargo results were mixed.
UnitedHealth Tops Views
Earnings rose 3%, but the Dow giant beat views. Revenue grew 14% to $80.15 billion. UnitedHealth touted the boost from OptumHealth shift to value-based care, which rewards good health outcomes. UNH stock rose to a new high as health insurers stand out.
Taiwan Semi Beats Views, Guides Higher
Taiwan Semiconductor Manufacturing smashed expectations for the first quarter and guided higher for the current period. The world's top chip foundry said its earnings per share rose 47% year over year while sales climbed 36%. It cited strong sales of chips for high-performance computing and automotive applications for its outperformance. Taiwan Semi forecast sales rising 35% in the second quarter with improved profitability.
News In Brief
Thoma Bravo on April 11 acquired identity management software maker SailPoint Technology for $6.9 billion. The private equity firm previously bought cybersecurity firms Proofpoint, Sophos and Barracuda.
Fastenal earnings grew 27% and revenue rose 20%, both beating.
CarMax earnings per share fell 23%, a big miss, while revenue jumped 49% to $7.687 billion, ahead of views. Used car volumes fell in Q4 as average prices surged 40% year over year, CarMax said.
