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Dow Streak Ends; Inflation Data & Q1 Earnings Ahead
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Monday, May 13th, 2024
The Dow finally broke its 8-day winning streak today. In truth, this run didn’t seem so much like a breakaway to a higher orbit and more of a re-establishing levels given up during a dip mid-April. The blue-chip index dropped -81 points today, -0.21%, whereas the S&P 500 was virtually breakeven today: -0.024%. The Nasdaq gained +0.30% for the session and the small-cap Russell 2000 grew +0.16%.
Since roughly Election Day 2020, all major indices are up nicely. This, of course, encompasses the Great Reopening but also harsh supply concern which caused price spikes in many areas. We’ve also seen minimum wage rates increase in several regions, which has kept prices higher. And for sure the current 5.25-5.50% Fed funds rate we’ve had for the past 10 months is keeping things like mortgage rates at multi-decade highs. Still, the Russell is +30% over this period, the Dow +50%, the S&P +80% and the Nasdaq +100%. We’re even back near all-time highs as we close in on the halfway point of 2024 next month.
Let us not forget the AI phenomenon, now into its second calendar year. In fact, OpenAI has just unveiled its new flagship model, Chat GPT 4o (that’s “o” as in “oh,” not “zero”). This came from the company’s Spring Update, where the now multi-modal, multi-lingual information tool promises to be the next step in AI technology. It’s both cheaper and twice as fast as GPT 4, and OpenAI CEO Sam Altman said it’s “the best computer interface I’ve ever used.” We also expect a new Google I/O developer conference tomorrow.
Elsewhere, market analysts remain on alert. Tuesday morning brings the monthly wholesale price report known as the Producer Price Index (PPI) for April, followed by the ever-important Consumer Price Index (CPI) on the retail front early Wednesday. Both are expected to tick up slightly month over month but continue a longer-term downward trajectory in the year-over-year prints.
For nearly a full year, the Inflation Rate (headline CPI year over year) has been in the “3-handle” range, from +3.0% to +3.7%. Last month registered a +3.5%; the low for the year thus far was +3.1% in January. Pre-pandemic, we had been range-bound with a Goldilocks Inflation Rate between +1.6% and +2.5% — in-line with the Fed’s continued preferred interest rate target of +2%. Near-term highs ballooned up to +9.1% in June of 2022. So we’ve made good progress, but still have a ways to go.
Tomorrow morning, we also await Home Depot (HD - Free Report) Q1 numbers. Expectations are for negative earnings growth year over year to -5.5% on revenues expected to come in -1.6%. The home improvement giant does have a good track record of earnings beats, with only one miss in the past five years on a trailing four-quarter average earnings beat of +2%. The company was the worst performer on the Dow today, however, as there may be some concerns about the quarterly performance about to be reported.
Image: Bigstock
Dow Streak Ends; Inflation Data & Q1 Earnings Ahead
Monday, May 13th, 2024
The Dow finally broke its 8-day winning streak today. In truth, this run didn’t seem so much like a breakaway to a higher orbit and more of a re-establishing levels given up during a dip mid-April. The blue-chip index dropped -81 points today, -0.21%, whereas the S&P 500 was virtually breakeven today: -0.024%. The Nasdaq gained +0.30% for the session and the small-cap Russell 2000 grew +0.16%.
Since roughly Election Day 2020, all major indices are up nicely. This, of course, encompasses the Great Reopening but also harsh supply concern which caused price spikes in many areas. We’ve also seen minimum wage rates increase in several regions, which has kept prices higher. And for sure the current 5.25-5.50% Fed funds rate we’ve had for the past 10 months is keeping things like mortgage rates at multi-decade highs. Still, the Russell is +30% over this period, the Dow +50%, the S&P +80% and the Nasdaq +100%. We’re even back near all-time highs as we close in on the halfway point of 2024 next month.
Let us not forget the AI phenomenon, now into its second calendar year. In fact, OpenAI has just unveiled its new flagship model, Chat GPT 4o (that’s “o” as in “oh,” not “zero”). This came from the company’s Spring Update, where the now multi-modal, multi-lingual information tool promises to be the next step in AI technology. It’s both cheaper and twice as fast as GPT 4, and OpenAI CEO Sam Altman said it’s “the best computer interface I’ve ever used.” We also expect a new Google I/O developer conference tomorrow.
Elsewhere, market analysts remain on alert. Tuesday morning brings the monthly wholesale price report known as the Producer Price Index (PPI) for April, followed by the ever-important Consumer Price Index (CPI) on the retail front early Wednesday. Both are expected to tick up slightly month over month but continue a longer-term downward trajectory in the year-over-year prints.
For nearly a full year, the Inflation Rate (headline CPI year over year) has been in the “3-handle” range, from +3.0% to +3.7%. Last month registered a +3.5%; the low for the year thus far was +3.1% in January. Pre-pandemic, we had been range-bound with a Goldilocks Inflation Rate between +1.6% and +2.5% — in-line with the Fed’s continued preferred interest rate target of +2%. Near-term highs ballooned up to +9.1% in June of 2022. So we’ve made good progress, but still have a ways to go.
Tomorrow morning, we also await Home Depot (HD - Free Report) Q1 numbers. Expectations are for negative earnings growth year over year to -5.5% on revenues expected to come in -1.6%. The home improvement giant does have a good track record of earnings beats, with only one miss in the past five years on a trailing four-quarter average earnings beat of +2%. The company was the worst performer on the Dow today, however, as there may be some concerns about the quarterly performance about to be reported.
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