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Stocks closed sharply lower yesterday, except for the Dow, which only gave up -0.09%.
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research
  

Stocks Closed Lower Yesterday On Hotter CPI Inflation, PPI Inflation Report On Deck For Today

Stocks closed sharply lower yesterday, except for the Dow, which only gave up -0.09%. But the small-cap Russell 2000 was down -1.93%, and the tech-heavy Nasdaq and S&P were down -1.88% and -1.11%.

A slightly hotter-than-expected inflation report set the decline in motion yesterday.

Yesterday's Consumer Price Index (CPI) retail inflation report showed headline inflation up 0.6% m/m, in line with views, and up from last month's 0.4%. The y/y rate came in at 3.7%, also in line with views, but above last month's 3.4%. The core rate (ex-food & energy), was up 0.3% m/m, slightly above estimates for 0.2%, but in line with last month, while the y/y rate came in at 2.6%, which was above the consensus for 2.5% and last month's 2.4%.

The higher core rate was probably the biggest surprise since that does not include the volatile (and higher as of late) energy prices. But while the headline met expectations, it still saw a three-tenths of a percentage point increase vs. last month. And that was larger than the two-tenths on core. But again, the higher core shows it's more than just energy and food lifting prices.

As for oil, it was only modestly higher yesterday. But remains within about 19% of oil's conflict highs.

We'll get another look at inflation today with the Producer Price Index (PPI) wholesale inflation report. The headline rate is expected to come in at 0.5% m/m vs. last month's 0.4%. The y/y rate is forecast at 5.4%, in line with last month's pace. The core rate is estimated at 0.3% m/m vs. last month's 0.2%, while the y/y rate is forecast at 4.5%, down from last month's 4.6%.

In addition to inflation readings, we'll also get Weekly Jobless Claims, Retail Sales, the Philadelphia Fed Manufacturing Index, the Empire State Manufacturing Index, and Business Inventories.

And more earnings.

We got plenty of big banks again yesterday before the open. Bank of America posted a negative EPS surprise of -2.70%, and a negative sales surprise of -2.15%. That translated to a quarterly EPS growth rate of 1.89% vs. this time last year, and a sales growth of 6.70%. They were off -4.76% yesterday.

Morgan Stanley posted a positive EPS surprise of 7.07%, and a positive sales surprise of 3.04%. That equated to a quarterly EPS growth rate of 8.21%, and a sales growth of 11.6%. They were off -2.75%.

And BlackRock posted a positive EPS surprise of 14.03%, and a positive sales surprise of 3.96%, for a quarterly EPS growth rate of 37.9%, and a sales growth of 19.1%. They were up 0.72%.

Today we'll hear from banks U.S. Bancorp, PNC Financial, and Charles Schwab. But we'll hear from more than just banks with Taiwan Semiconductor on deck, J.B. Hunt Transport, and Alcoa reporting. All in all, we'll hear from 34 companies today.

Next week gets busier with 422 stocks set to report, including two Magnificent 7 companies (Meta and Tesla), and other high profile names like Netflix, Texas Instruments, IBM, Abbott Labs, and Western Digital.

In the meantime, we'll see if the market can regroup after yesterday's decline.

Was nice to see yields ease with the 10-year ticking down to 5.19%.

If we can get a decent-enough PPI report today, that might be enough to help stocks rebound and keep easing longer-term yields.

See you tomorrow,

, Zacks Investment Research

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