(Justin Vaughn, Editor, Options Trading Report)
Investors and traders nudged the indices a slight bit higher on Monday as the overall short term outlook is clouded by the many upcoming first quarter corporate earnings reports. Underlying concerns of interest rates and just what the Federal Reserve has up their sleeve adds more consternation. After the first round of large bank first quarter earnings releases last week, and the very positive earnings per share each bank announced, the street was poised to build some enthusiasm. “Markets are in a bit of a wait-and-see-more,” said Angello Kourkafas, investment-strategist at Edward Jones. “We have alot of corporate earnings ahead of us and the Fed rate decision in a couple of weeks.”
More ‘big banks’ posted ‘better first quarter earnings as Tuesday’s market opened, with few exceptions. Again stocks were lethargic, with the Dow Jones Industrial Average off slightly and the Nasdaq Composite and S&P 500 edging up slightly. With a busy two weeks ahead many sectors will see more results of a larger picture of the pulse of the market. Many Fed bank governors, echoed their strong support for Mr. Powell and his actions to bring down inflation, at all costs. Wednesday’s market was no different than Monday and Tuesday, with more corporate earnings being released in a broader range of sectors.
Investors have been swamped with earnings reports and lingering stubborn inflation, after digesting the mini bank crisis a month ago. So far this earnings ‘season’ has generally been very positive, with nearly 80% of corporations reporting better volume than the last comparable quarter, and an increased bottom line of 7% better EPS (earnings per share). Few companies failed to meet or beat EPS, with few surprises blurring the market. Inflation concerns are ‘real,’ suppressing the market, holding ‘players’ hostage. Nearing the week’s end, gold has softened a bit, hovering in the $2,000 range and ‘mighty oil’ is cautious, with Brent crude sliding below $80 a barrel to $78.27 at Thursday’s close. The Dow Jones finished down a hundred points in a market that floundered aimlessly drifting pretty much all week. Art Hogan, chief market strategist at B. Riley Financial commented; “We haven’t found something that’s breaking the back of this market and we’ve given plenty of chances.” He adds, “that despite the incoming economic data, slowdown fears and banking crisis that settled the broader financial sector last month, markets have traded sideways in recent weeks.”
Sweet Sugar…Sugar prices are climbing, hitting a ten-year high, as weather has battered crops around the world. In both Brazil and India, the leading sugar producers in the world, inclimate weather has curtailed production significantly, sending prices sky-high. Thailand, a smaller producer has also suffered due to an over abundance of rain and drought.. A lot of things have gone wrong on the production side, with both India and Thailand and, to a lesser extent, Brazil. Thailand and India both suffered the worst as production fell one million metric tons short, in each country after expectations of 12 million and 18 million metric ton productions respectively. Brazil, while not suffering as steeply as Thailand and India, has rebounded quickly, with a bountiful crop this year between 36.5 to 40 million metric tons, as confirmed by Charles Branch, head of Agriculture and Energy at Britannia Global Markets. Brazil has shifted from ethanol to nearly 90% sugar production, a major factor in achieving historic production.
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RUMBLINGS ON THE STREET
Brian Levitt, global market strategist at Invesco, WSJ “I don’t think anyone can really answer with certainty if we’re entirely through a challenging period.” So far the economy has held up better than expected. “If there is a recession within the year it seems likely it would be relatively mild. The challenge is seeing if there’s something lurking that makes it more severe,” he said.
Randall W. Forsyth, Writer for Barron’s UP & DOWN WALL STREET, Barron’s “The most proximate threat to the dollar and its global status would be a U.S. default resulting from the failure to raise the debt ceiling. For America, maintaining financial independence is a matter of national security. The kowtowing of the French president demonstrates the alternative.”
Larry Fink, CEO, Blackrock, on CNBC, Barron’s “I believe inflation is going to be stickier for longer….I think we’re going to have a 4%-ish floor.”
Nate Geraci, president of the ETF Store, a financial advisory firm, Barron’s “I believe that the ETN structure should be taken out behind the barn and shot,” he said. “There are too many examples where ETN holders have been burned over the years.”