Markets slump as inflation persists & JPMorgan disappoints

Dow dropped 373, decliners over advancers about 5-2 & NAZ declined 224.  The MLP index added 1 to the 282s & the REIT index was off 2+ to the 366s.  Junk bond funds drifted lower & Treasuries saw heavy buying which reduced yields after a recent rise in yields.  Oil rose 2+ to the 87s on growing MidEast tensions (more below) & gold surged 72 to 2445 for another record.

AMJ (Alerian MLP Index tracking fund)

JPMorgan Chase (JPM), a Dow stock, posted profit & revenue that topped estimates as credit costs & trading revenue came in better than expected.  EPS was $4.44, up from a year earlier, boosted by its takeover of First Republic during the regional banking crisis last year.  Per-share earnings would've been 19¢ higher excluding a $725M boost to an FDIC fee covering costs from last year's bank failures.  Revenue climbed 8% to $42.55B as the bank generated more interest income due to higher rates & larger loan balances.  But in guidance for 2024, the bank said it expected net interest income of around $90B, which is essentially unchanged from previous wording.  That appeared to disappoint investors, some of whom expected JPM to raise its guidance by $2B to $3B for the year.  CEO Jamie Dimon called his company’s results “strong” across consumer & institutional areas, helped by a still-buoyant US economy, though he struck a note of caution about the future.  “Many economic indicators continue to be favorable,” Dimon said. “However, looking ahead, we remain alert to a number of significant uncertain forces” including overseas conflict & inflationary pressures.  The stock sank 11.10 (6%).

JPMorgan Chase shares drop after bank gives disappointing guidance on 2024 interest income

Treasury yields declined as investors considered the state of the economy after the release of inflation data & weighed the path ahead for interest rates.  The yield on the 10-year Treasury was down more than 8 basis points at 4.489% & the 2-year Treasury  yield was last at 4.877% after falling by 8 basis points.  The Treasury yields were still up sharply for the week despite Fri's decline.  The benchmark 10-year was up more than 10 basis points during that time, while the 2-year has risen more than 15 basis points.  Yields & prices have an inverted relationship & 1 basis point is equivalent to 0.01%.  Investors considered the state of the economy after key economic data releases, & assessed what this could mean for upcoming monetary policy decisions from the Federal Reserve.  Import prices in the start of 2024 posted their largest 3-month gain since May 2022, according to new data from the Labor Dept.  Boosted by a 4.7% jump in fuel, import prices rose 0.4% in Mar, higher than the 0.3% estimate.  On a 12-month basis, import prices rose 0.4%, the first increase since Jan 2023.  The Mar producer price index, which tracks wholesale inflation, came in below expectations, reflecting a 0.2% increase from the previous month.  The forecast called for it to rise 0.3%.  The reading eased concerns about persistent inflationary pressures slightly.  Investors have been fretting about what sticky inflation could mean for interest rate cuts that are expected to take place later this year.  Market expectations for when the first rate cut will take place shifted from Jun to Sep in recent days after the Mar consumer price index came in higher than expected earlier this week.  Some investors are also considering the possibility of there being no rate cuts at all this year.  The Fed has frequently said its decision-making on rate cuts will be data-led & that it is waiting for inflation to move lower before easing monetary policy.

Treasury yields fall as investors weigh state of economy

The Intl Energy Agency (IEA) downgraded its forecast for 2024 oil demand growth, citing “exceptionally weak” OECD deliveries, a largely complete post-Covid-19 rebound & an expanding electric vehicle fleet.  In its latest monthly oil market report, the IEA said it had revised down the forecast by around 100K barrels per day (bpd) to 1.2M bpd.  The global energy watchdog said it expected the pace of expansion to decelerate even further to 1.1M bpd next year “as the post-Covid 19 rebound has run its course.”  The IEA's report comes amid a rebound in oil prices on elevated Middle East tensions, with energy market participants closely monitoring the prospect of supply disruptions from the oil-producing region.  Iran, which is a member of OPEC, has vowed to retaliate after it accused Israel of bombing its embassy in the Syrian capital of Damascus earlier this month.  The attack has ratcheted up tensions in a region already grappling with the ongoing Israel-Hamas war.  Israel has not claimed responsibility for the attack.  “We’re seeing the surge in [electric vehicle] sales, especially in China and also in Europe, really taking into gasoline demand, but also in the United States,” Toril Bosoni, head of the oil industry & markets division at the IEA, said.  “There has been a lot of talk about sales not increasing as much as maybe was expected, but EV sales and increased fuel efficiencies in the car fleet is lowering gasoline demand, at least in advanced economies and particularly in China.”

IEA downgrades oil demand growth forecast as prices heat up

News has not been heartwarming.  JPM's earnings release was very unsettling & lingering thoughts about postponing rate cuts mean investors are postponing buying stocks.  The conflict dragging on in the Mideast & thoughts about rising oil prices are adding to uncertainties investors are dealing with.  The stock market needs time to catch its breath after its extraordinary advance in recent months.  Meanwhile safe haven gold is up an astounding 350 so far this year!!

Dow Jones Industrials