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Market Moves You Need to See
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks Closed Lower Last Week, Earnings Season Officially Starts This Week

Stocks closed sharply lower on Friday and lower for the week.

Slowing progress on inflation per last week's CPI and PPI reports weighed on stocks as it not only pushes out the timeline for when the Fed starts cutting rates, but is opening up a new debate on if they begin cutting rates at all this year.

At the moment, the Fed is still forecasting 3 rate cuts this year (presumably by 25 basis points). And most Fed watchers are thinking June will be the earliest. Nonetheless, if subsequent data points show disinflation continuing to slow, or worse, heading back up, that could impact the narrative.

Stocks also came under pressure on Friday after warnings that an attack on Israel by Iran was imminent.

With growing tensions in the middle east, and energy prices already on the rise, that weighed on shares.

On Saturday evening, Iran launched more than 300 armed drones on Israel. The majority were shot down by Israel, as well as the U.S., U.K. and Jordan. There were no known U.S. or Israeli deaths.

Afterwards, Iran said that its attack "can be deemed concluded." Although, Israel responded by saying the situation is "not over."

However, for now, the imminent danger has come and gone. And the fear of escalation appears to have been muted at present.

If stocks were pressured by the threat of imminent attack, stocks are ripe for a rebound given the better than expected outcome.

In other news, Import and Export Prices showed import prices rose 0.4% m/m vs. last month's 0.3% pace, and views for 0.3% as well. On a y/y basis, they were up 0.4% vs. last month's -0.9% print. Export prices rose 0.3% m/m vs. last month's 0.7%, and in line with views. On a y/y basis, however, they were down -1.4%, but that was an improvement from last month's -2.0% pace.

The Consumer Sentiment Index slipped to 77.9 vs. last month's 79.4 and estimates for 79.0. The year-ahead inflation expectations, which is also a part of the Consumer Sentiment report, rose to 3.1% vs. last month's plot of 2.9%.

Today we'll get Retail Sales, the NY Fed Manufacturing report, the NAHB Housing Market Index, and Business Inventories.

This week also marks the official start to earnings season when Alcoa reports after the close on Wednesday, 4/17.

(For those who are interested to know, reported earnings by Alcoa has long been considered the 'official' start to earnings season, while Hewlett-Packard (now HP Inc.), has long been considered the 'official' end to earnings season. That's because, Alcoa, at one time, was the first Dow component to report earnings. And Hewlett-Packard was the last of the Dow components to report earnings. Ironically, both AA and HPQ are no longer part of the Dow Jones Index. But after bookending earnings season for so long, that tradition has stuck, regardless of their current Dow non-membership status.)

Earnings season is always an exciting time since stocks typically go up during earnings season.

After last week, stocks closed lower for the second week in a row. Although, it should be noted that in the YTD tally prior to that, the S&P was up in 9 out of 13 weeks.

This week, we'll see if the market can regroup, and get ready for the next leg up.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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