The stock market rally had a positive but volatile week as generally cooling inflation readings were offset by rising recession fears. The Nasdaq edged up, while the S&P 500 and Dow Jones hit two-month highs, but good buying opportunities were limited. Bank earnings were generally positive, with JPMorgan Chase and Citigroup clear winners.
UnitedHealth topped views, but shares still retreated. Delta Air Lines reported mixed Q1 results but gave bullish guidance after American Airlines gave disappointing preliminary Q1 results.
Stock Market Rally Volatile, Resilient
The major indexes advanced despite some up-and-down action amid conflicting economic signals and some key earnings reports. The Nasdaq eked out a small advance, with Thursday's strong gain offsetting losses the rest of the week. The Dow Jones and S&P 500 hit two-month highs. There weren't a lot of good buying opportunities. Treasury yields jumped. The dollar retreated to a two-month low, but did bounce back on Friday.
Recession Risks Rise, Inflation Mixed
The latest batch of data appears to confirm that the U.S. economy is headed for a brush with recession, but inflation pressures have yet to give way, so one last Fed rate hike remains possible. The consumer price index rose just 0.1% in March, as energy prices fell. That lowered the CPI inflation rate to 5%. However, the core CPI rose 0.4%, lifting the core inflation rate to 5.6%. Goods prices have stopped falling, while services prices outside of housing, a key area of concern for the Fed, showed broad strength. Yet that's bound to change if the economy keeps on its current trajectory. Retail sales slid a sharper-than-expected 1% in March, and 0.8% excluding autos. Meanwhile, new claims for jobless benefits rose 11,000 to 239,000 in the week through April 8. The four-week average of claims rose to 240,000 and now stands nearly 50,000 above the trough in late September. Fed staff forecast a "mild recession" later this year due to banking woes, according to newly released minutes from the March policy meeting.
JPMorgan Stands Out In Bank Earnings
Larger banks handily beat earnings expectations for quarterly results Friday, propelled by surging net interest income despite the March panic. JPMorgan smashed earnings forecasts, bolting 55% to $4.10 per share on a 25% leap in revenue. Net interest income spiked 49% to $20.9 billion. Notably, deposits edged up 2% vs. the end of 2022. Wells Fargo earnings catapulted 40% while revenue jumped 17%, driven by a 45% spike in net interest income. Deposits declined 2% and Wells increased its credit loss provisions by 26% from Q4 to $1.2 billion. Citigroup earnings rose 8% after five quarters of declines. Citi guided 2023 revenue between $78 billion and $79 billion. Superregional PNC Financial fared better than most midsized banks in March. PNC earnings leapt 23% but revenue was just short of expectations. Deposits increased slightly but net margins dipped vs. Q4 amid higher funding costs. PNC guided Q2 revenue to decline 3% vs. Q1, below views.
JPM stock jumped on results, with Citigroup also rising, both clearing key levels. WFC rose solidly for the week, while PNC hit a two-year low.
UnitedHealth Tops
UnitedHealth Group earnings per share grew 14% as revenue rose 15% to $91.9 billion, both beating. Solid double-digit growth for the managed-care leader, which bumped up full-year guidance, shows why UnitedHealth just rejoined IBD's Long-Term Leaders list. UNH stock fell on earnings after rising for six straight sessions and nine of the last 10.
Airlines Miss On Q1 EPS, Delta Guides Up
Delta Air Lines reported Q1 profit that fell short of views while revenue grew 37%, easily beating. The carrier guided high for the current quarter and maintained full-year guidance, citing "record advance bookings for the summer" travel season — and improving demand for international travel. A day earlier, American Airlines gave preliminary Q1 results that topped its prior EPS target, but still fell short of consensus views. AAL stock plunged, with Delta and other carriers were mixed.
News In Brief
Triton International soared as Brookfield Infrastructure Partners agreed to buy the world's largest lessor of intermodal freight containers in a $13.3 billion cash-and-stock deal.
Boeing said 737 Max production and deliveries will be hit in the short term due to a parts issue from supplier Spirit AeroSystems. Boeing had been expected to increase Max deliveries. BA stock tumbled and SPR dived.
Tesla cut prices on most EVs in key European markets, along with various discounts in Israel and Singapore. That follows across-the-board U.S. price cuts a week earlier.
WW International skyrocketed on closing a telehealth acquisition and an analyst saying the weight-loss company is well-placed to capitalize on obesity drugs.
Novo Nordisk continued hitting highs after inking a deal to develop new diabetes and obesity treatments using Aspect Biosciences' bio-printing capabilities. The Danish drug giantalso boosted its full-year outlook, citing better-than-expected sales of weight-loss drug Wegovy and diabetes med Ozempic.
TG Therapeutics soared after an analyst noted a "solid jump" in March sales for its new multiple sclerosis drug Briumvi.
Shockwave Medical surged after the Centers for Medicare and Medicaid Services unveiled a proposed rule that outlines three high-paying codes for coronary intravascular lithotripsy, or IVL. The rule would go into effect near the end of September, benefiting Shockwave which uses IVL technology to "crack" hardened calcium in the arteries.
InMode preannounced consensus-beating first-quarter sales and profits on Wednesday. The medical aesthetics company expects $105.7 million to $105.9 million in sales and adjusted profit of 50-51 cents per share.
