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Market Recap – April 15, 2024

Keel Point

April 15, 2024

CPI inflation in March was higher than expected. Although March PCE inflation (Fed’s preferred metric) data due out later in April will be more moderate, financial markets are anxious about inflation and when the Fed will begin cutting interest rates.  So, the 10-year Treasury interest rate was up and the S&P 500 was down last week.

  • The third consecutive 0.4% m/m increase in core CPI inflation in March, following last week’s report of 303,000 new jobs in March, sparked fears that higher real economic growth could lead to a resurgence in inflation, maybe higher interest rates, and a likely delay in cutting rates.
  • Using March CPI and Producer Price Index (“PPI”) data, Capital Economics estimates that core PCE prices increased by 0.21% m/m in March and 2.66% over the past 12-months. While CPI “supercore inflation” rebounded to 4.8% in March, from a low of 3.6% last October, the PCE supercore seems to have fallen to a three-year low of 3.3%.
  • Although the pace of core PCE disinflation has slowed, it isn’t signaling a resurgence in inflation, and core PCE inflation is likely to be around 2.4% by mid-year.
  • That said, Fed officials want to see at least several more months of “good” inflation data before cutting interest rates, which suggests no rate cutting until their September meeting.  The European Central Bank, however, is still on track to begin interest rate cuts in June with a target of one full percentage point of cuts in 2024.
  • First quarter earnings reporting started last week.  Consensus calls for 4% U.S. earnings per share (“EPS”) growth.  Citibank notes that earnings upgrades have beaten downgrades YTD, and JPMorgan indicates: “Global economic data has been exceeding expectations at the highest rate in over a year.”

The Consumer Sentiment Current Conditions Index declined in early April mostly because of concerns about rising gasoline prices. (UMichigan) 

  • Gasoline prices at the pump, which are highly visible to consumers, are up 24 cents per gallon over the last month to $3.63, and summer driving demand typically puts more upward pressure on costs. (Axios)
  • Less visible increases on stock market wealth, homeowner equity, and higher average wages have a positive impact on consumer spending, but don’t outweigh concerns about inflation in daily expenses.

Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SIPC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC, an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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