The major indexes ended mixed over a holiday-shortened week, which saw the release of the first major corporate earnings reports of 2022. Value stocks continued to outperform their growth counterparts, but small-caps regained ground lost the previous week to large-caps. Financials lagged within the S&P 500 Index, dragged lower by JPMorgan Chase, after the banking giant missed Wall Street’s estimate. Energy shares outperformed. Trading volume was lower throughout the week, a possible indication of traders awaiting upcoming earnings announcements and economic developments. The market was closed Friday in observance of Good Friday.
A combination of analysts projecting a sharp deceleration of earnings growth along with concern how price pressures from inflation will weigh on corporate profit margins seemed to weigh on sentiment. Earnings estimates for names in the S&P 500 are moving lower—mid-single digits in percentage—to the slowest pace since late 2020. That said, it is typical for actual earnings to exceed analyst estimates. Producer price inflation data out of China was negative, and another ‘dovish’ Federal Reserve Bank President, Charles Evans, said at an event in Detroit that he considers an accelerated pace of rates hikes worth debating.
On Tuesday, the Labor Department reported that headline inflation jumped 1.2% in March, bringing the year-over-year increase to 8.5%, slightly above consensus expectations and the highest since 1981. The core rate, which excludes food and energy prices, rose only 0.3%, which was below consensus expectations of around 0.5%. This led stocks to rise initially on hopes that inflation might be peaking, but the rally was short-lived with crude oil prices rallying back through $100 a barrel after Russian President Vladimir Putin said peace talks with Ukraine are stalled.
Further threatening corporate profits, core producer prices, which measure prices paid by wholesalers, rose 1.0% in March, roughly double estimates. Over the previous 12 months, prices have surged a record 9.2%.
This past weekend was a time to celebrate the Resurrection of Jesus Christ and think about all he has done for us. When reading the story, now, it can be tempting to use hindsight and wonder why the disciples, and those who followed Jesus, ever had any doubt that he would rise again after the crucifixion. However, as we have all surely experienced at one time or another, when living through uncertain events, eliminating doubt is a daunting task. As 1 Peter 1:13 states, “Therefore, once you have your minds ready for action and you are thinking clearly, place your hope completely on the grace that will be brought to you when Jesus Christ is revealed.” There will assuredly be uncertainty ahead, but there are always areas of certainty we can all enjoy. During such times, we seek to think clearly and remember that we cannot see the end of the story, so we must earnestly prepare for what lies ahead.
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