"If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."
— Warren Buffett
SUMMARY
· Every major index closed higher on Friday and saw gains for the week.
· The yield of the 10-year U.S. Treasury bond went higher.
· The Cboe Volatility Index reached the highest level in five years.
· The price of gold hit above the $3,200-per-ounce level for the first time.
· Big banks started earnings season off strong.
IMAGE SOURCE: The NY Times
Banks Came Out Swinging
Major U.S. banks opened quarterly earnings season on Friday, analysts were forecasting that first-quarter earnings for all companies in the S&P 500 rose by an average of 7.3% overall, according to FactSet. J.P. Morgan Chase, Wells Fargo and Morgan Stanley each reported earnings that exceeded estimates.
JPMorgan
JPMorgan reported earnings of $5.07 per share, beating the FactSet views for $4.63 per share. Revenue increased 8% to $45.31 billion, also beating estimates for $43.99 billion.
CEO Jamie Dimon noted that investment banking fees rose 12% during the quarter, but clients have become "more cautious" amid the increased market volatility from geopolitical and trade-related tensions. Dimon said that, "the economy is facing considerable turbulence" due to tariffs, trade wars, ongoing sticky inflation, high fiscal deficits, with still-high asset prices and volatility. Potential positive drivers include tax reform and deregulation. "We hope for the best but prepare the firm for a wide range of scenarios," Dimon said in the release.
Wells Fargo
Wells Fargo earnings rose to $1.39 per share, to beat views for $1.23 per share. Revenue declined 3.4% to $20.15 billion, missing forecasts for $20.72 billion.
"We support the administration's willingness to look at barriers to fair trade for the United States, though there are certainly risks associated with such significant actions," Wells Fargo CEO Charlie Scharf said in the release. "Timely resolutions which benefits the U.S. would be good for business, consumers and the markets. We expect continued volatility and uncertainty and are prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of the policy changes."
BlackRock
BlackRock earnings increased 15% to $11.30 per share adjusted, ahead of estimates for $10.08 per share. Total revenue increased to $5.28 billion, just below expectations for $5.29 billion.
Bond Yields are the Story of the Week
Government bonds have been selling off while stocks have plummeted. This is not usual and has caused some investor concerns.
Both markets (stocks and bonds) have seen simultaneous sell-offs. The premier U.S. government bond, the 10-year Treasury note, saw its yield surge above 4.5% this week.
Bond prices and yields are inversely correlated, so rising yields signal lower appetite for the bonds. The 10-year Treasury yield ended last week more than 12% higher, while the S&P 500 closed out a week of volatile trading up 5.7%, rebounding late Friday after a series of brutal losses.
"We don't know exactly why bonds are gyrating so much," Barclays analyst Ajay Rajadhyaksha said in a note to clients Friday that he titled "This is not normal."
Soaring yields on 10- and 30-year Treasurys make it costlier for the federal government to borrow money.
Economic Data:
NFIB Small Business Optimism Index: Declined by 3.3 points month-over-month to 97.4. The Uncertainty Index decreased 8 points from February's (second highest ever) reading of 96.
Mortgage Bankers Association (MBA) Mortgage Applications Index: Increased 20% from the prior week.
Consumer Price Index (CPI): Headline month-over-month (MoM) declined 0.1% vs. expectations for a 0.1% gain. The headline year-over-year (YoY) gain was +2.4%, below the +2.6% expected and down from +2.8% in February.
Core CPI: Increased 0.1% MoM, which was below the +0.2% expected. On a YoY basis the core increased 2.8%, below the +3.0% expected.
Producer Price Index (PPI): Headline month-over-month (MoM) declined 0.4% vs. expectations for a 0.2% gain. The headline year-over-year (YoY) gain was +2.7%, below the +3.3% expected and down from +3.2% in February.
Core PPI: Decreased 0.1% MoM, which was below the +0.3% expected. On a YoY basis the core increased 3.4% from 3.2%, but below the +3.6% expected.
University of Michigan Consumer Sentiment: Fell to 50.8 from 57.0 in March and below 53.5 expected, representing the weakest reading since June 2022.
Consumer Credit: -0.8B vs. $12.0B expected. Within the report, 1-year inflation expectations jumped to 6.7% from 5.0% in March, representing the highest level since November 1981.
Initial Jobless Claims: Increased to 223K from 219K in the prior week, but in-line with economist expectations. Continuing Claims decreased 43K to 1.85M from last week.
The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised up to -2.3% on Wednesday from -2.8% on April 3rd.
Things to Watch
· PPI deeper dive: The headline PPI dropped 0.4% and partially reflected a big drop in volatile energy prices last month. But otther elements of the report could be more meaningful. For example, the core PPI, which excludes energy and food prices, fell 0.1% last month versus analysts' expectation for a 0.3% rise.
· Bank earnings come with warnings: Though the first quarter looked solid for banks reporting on Friday, banks are having to prepare for trade-related trouble ahead. JPMorgan Chase built its net reserves by $973 million and said in its release that it believes it's "prudent" to maintain excess capital and ample liquidity in this environment. "The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and 'trade wars,' ongoing sticky inflation, high fiscal deficits, and still rather high asset prices and volatility," said JPM CEO Jamie Dimon in the company's earnings release. Wells Fargo expects "continued volatility and uncertainty" and is positioning for an economic slowdown," remarked CEO Charlie Scharf in a statement. The banks are holding earnings calls with analysts as the market opens, potentially providing more color on trade tensions affecting their businesses and the economy.
Friday's Markets Snapshot
| Index | Friday Close | Point Change | Percentage Change |
| S&P 500 | 5,363.36 | +95.31 | +1.81% |
| Dow Jones Industrial Average | 40,212.71 | +619.05 | +1.56% |
| Nasdaq | 16,724.46 | +337.14 | +2.06% |
Biggest Stock Gainers
Biggest Stock Losers
Weekly Notables
- Despite an unsettled market, the NASDAQ surged more than 7% for the week, the S&P 500 added almost 6%, and the Dow climbed about 5%.
- On Tuesday, the S&P 500 rose as much as 3.8% at one point before closing down 1.6%. The next day, the index surged 9.5%, recording its biggest daily gain since 2008.
- President Trump announced a pause on the new tariffs for 90 days to allow for negotiations to potentially reduce tariffs and other trade barriers.
- The yield of the 10-year U.S. Treasury bond rose from around 4.00% at the close of the previous week to 4.47% on Friday.
- The Cboe Volatility Index surged on Monday and briefly reached the highest level in five years. It was down around 17% for the week.
- The price of gold climbed for the fifth week out of the past six, extending a year-to-date surge that pushed the precious metal's price above the $3,200-per-ounce level for the first time.
- The government's Consumer Price Index fell to the lowest level in four years.
- The U.S. Dollar Index ($DXY) dropped about 1% to just above 99, the first time since last July it's been under 100 and a three-year low.
- Semiconductor shares including Broadcom (AVGO) and Advanced Micro Devices (AMD) climbed around 1% ahead of the open after Reuters reported that U.S. chipmakers that outsource their manufacturing will be exempt from China's retaliatory tariffs.
- Stellantis (STLA) dropped nearly 3% in early trading after the automaker reported a 9% drop in first quarter shipments, Bloomberg reported.
- Bitcoin (/BTC) was up more than 3% this morning to back above $82,000.
- The CME FedWatch Tool shows a 28% chance of the Fed cutting rates 25 basis points at its early May meeting. The market prices in 85% odds of at least one rate cut by June.
- White House says Trump open to China tariff negotiations.
This Week's Notable 52-week Highs:
This Week's Notable 52-week Lows:
Nvidia and Apple Get Relief from Tariffs
President Donald Trump's administration has exempted smartphones, computers and other electronics from reciprocal tariffs. The exclusions were published late Friday by US Customs and Border Protection. The exclusions apply to smartphones, laptop computers, hard drives and computer processors and memory chips as well as flat-screen displays, which generally are made outside of the U.S. President "This is a large hole in the US tariff wall that will spare key firms like Apple and consumers of laptops and phones from sticker shock," said Gerard DiPippo, associate director of the Rand China Research Center. "But many other consumer, intermediate, and capital goods from China still face prohibitively high US tariffs. This exemption only covers one segment of the US economy."
Real I.D. Deadline is in a Few Weeks
The federal government says it will start enforcing Real ID requirements at U.S. airports starting May 7th. Travelers will need a Real ID-compliant license or other accepted form of identification like a passport to get through security before a domestic U.S. flight. "Make your appointments now as quick as possible," John Essig, the Transportation Security Administration's federal security director for New York City-area airports, said at a news conference at LaGuardia Airport earlier this month. "We certainly don't want to hold up anyone without Real ID at the checkpoint," Essig said.
Meta Adds Former Trump Advisor to its Board
Meta, the Facebook parent company, has added a new board member that is Trump-friendly. Dina Powell McCormick, who served as an advisor to the president from 2017 until 2018, is the company's newest board member. Last month, she and her husband, Republican Sen. Dave McCormick, were seen at a wrestling match with Trump and Tesla CEO Elon Musk. Meta is also adding Stripe's co-founder and CEO Patrick Collison to the board.
The Week Ahead
- Potential market moving catalysts this week: - Monday (4/14): no reports. Tuesday (4/15): Empire State Manufacturing, Export Prices, Import Prices. Wednesday (4/16): Business Inventories, Capacity Utilization, EIA Crude Oil Inventories, Industrial Production, MBA Mortgage Applications Index, NAHB Housing Market Index, Net Long-Term TIC Flows, Retail Sales. Thursday (4/17): Building Permits, Continuing Claims, EIA Natural Gas Inventories, Housing Starts, Initial Claims, Philadelphia Fed Index. Friday (4/18): no reports,
- Earnings on deck this week: - Monday (4/14): Goldman Sachs Group Inc. (GS), MT&T Bank Corp. (MTB), Pinnacle Financial Partners Inc. (PNFP). Tuesday (4/15): Johnson & Johnson (JNJ), Bank of America Corp. (BAC), Citigroup Inc. (C), PNC Financial Services Group Inc. (PNC), Albertsons Companies Inc. (ACI), Interactive Brokers Group Inc. (IBKR), United Airlines Holdings Inc. (UAL), J.B. Hunt Transport Services Inc. (JBHT). Wednesday (4/16): ASML Holding NV (ASML), Abbott Laboratories (ABT), Prologis Inc. (PLD), US Bancorp (USB), Travelers Companies (TRV), CSX Corp. (CSX), Rexford Industrial Realty Inc. (REXR), Alcoa Corp. (AA). Thursday (4/17): United Health Group Inc. (UNH), American Express Co. (AXP), Charles Schwab Corp. (SCHW), Truist Financial Corp. (TFC), DR Horton Inc. (DHI), Fifth Third Bancorp (FITB), State Street Corp. (STT). Friday (4/18): Comerica Inc. (CMA).
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