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Retail sales came in higher than expected

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A new trading week starts with pertinent content. Not only does Q1 earnings season pick up following Friday morning’s release of earnings data from big banks like JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) , but we also see new inflation metrics hitting the tape. The immediate takeaway is that pre-market futures are rather pleased with these outcomes, with the Dow moving from +230 points to +324, the S&P 500 from +31 to +42 and the Nasdaq from +127 points to +165 points. Meanwhile, bond yields for the 2-year and 10-year blossomed to +4.98% and +4.62%, respectively.

Retail Sales for March were hotter than expected. Actually, today’s headline more than doubled expectations: +0.7% from the +0.3% consensus estimate. This is actually down from the previous month, which was revised up +30 basis points (bps) from +0.6% originally reported to +0.9% this morning. Subtracting big-ticket auto sales, this number goes up to +1.1% from +0.5% expected, with the prior month revision doubling to +0.6%. Ex-volatile gasoline prices, we’re still at +1.0%, with the Control figure — which gets plugged into GDP and other wider metrics — nearly triple expectations to +1.1%.

What this tells us is the same thing we’ve seen elsewhere. Last week’s Consumer Price Index (CPI), which spooked markets greatly and changed the narrative of three Fed rate cuts beginning in June to perhaps zero cuts for 2024 at all. The selloff on such a prospect was swift and strong, continuing through the end of last week, which was the worst trading week for the Dow in more than a year. Retail input costs are higher, and prices are being passed along to the consumer without much difficulty, at least as of last month.

The latest Empire State Manufacturing Survey is also out this morning. The print for April was once again lower than estimates: -14.3 versus -10.0 expected, though still an improvement from the previous month’s -20.9. This makes five straight months, and eight of the past 12, where manufacturing numbers are negative for New York, the fourth-largest state in the U.S. For some perspective, the near-term low came in January of this year, -43.7 — the worst since the heart of the pandemic — with the recent highs just +9.1 in November of last year.

Goldman Sachs (GS - Free Report) routed expectations in its Q1 release ahead of the bell. Earnings of $11.58 per share easily surpassed the $8.54 anticipated (and $8.79 posted in  the year-ago quarter). This marks the strongest earnings quarter for the top-tier investment bank since Q3 of 2021. Revenues of $14.21 billion similarly leapt past the consensus estimate of $12.89 billion, based on +14.8% return on equity. Shares are up +3.7% on the news; Goldman had been particularly prone to the recent selloff, but is now back to positive territory year to date.

Both the economy and stock market are showing resiliency. This comes after a spike in oil prices over the weekend, as fears of Iran’s attempted assault on Israel threatens to escalate tensions in the Middle East, which may further ratchet up oil prices from already higher levels. Major oil stocks such as ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) on’t report earnings until the last week of April, but will not include recent events potentially affecting the price of oil.

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