It was another volatile week on Wall Street with some unexpected earnings results contributing to the ups and downs.
Earnings can turn the market on its head in a matter of hours, which is what we’ve seen this week. As we parse out the results, keep in mind that paying attention to these reports is critical… but keeping a cool head is how savvy investors will profit in this environment.
Wednesday’s CPI report was higher than expected — prices are up 9.1% compared to the same month last year, and on a month-over-month basis, inflation is up 1.3%. Those headline numbers include food and energy prices, which, if excluded, means so-called “core” inflation was only up 0.7% compared to last month.
We wouldn’t normally place too much importance on core inflation numbers, but right now, it’s the most relevant number to watch. Food and energy prices tend to fluctuate quickly — we’re seeing in real time as gas prices decrease from all-time highs — so excluding them gives us a more consistent number.
We covered the CPI report’s impact on the stock market in our Learning Markets livestream Wednesday night. If you want more information on how the S&P survived and the impact it could have on your portfolio, click here.
Regardless of which number matters the most, this week’s inflation report is not likely to move the market very much. Traders have been waiting for earnings reports to be released, and that got going on Thursday…
Banks Tank & Triumph
We were far more optimistic about initial earnings reports this week coming from banks like JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS).
Expectations were low, but volatility in the fixed income (bond) market has been high — that’s a good thing for banks. Volatility drives commissions and fees. Plus, positive investor sentiment driven by good news in this sector could send the S&P back up to break above resistance.
However… JPMorgan’s stock slid nearly 4.3% after it announced lackluster earnings Thursday. The bank fell short of expectations — earnings were down 28%, likely a result of the bank adding to reserves for bad loans and halting its share buybacks. We’ve got more insight on JPM’s loan losses and other topics in this quick livestream short on our YouTube channel.
Morgan Stanley’s results were hurt by a whopping 55% dip in investment banking revenue, and profits dipped 29%. Shares dropped 1.4% after the news broke. Get more details on MS in the livestream short we recorded Thursday.
Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C), on the other hand, helped give the market a much-needed boost this morning. WFC rose 2.8% even as profits decreased slightly, and C posted a 5.2% jump, beating estimates as it benefited from a rising rate environment.
We await other banks’ earnings reports next week, but the one consolation at this point is that falling banking revenue will drag on interest rates and inflation — which, as a result, may lower expectations for the Fed’s rate hikes later this year.
Our plan remains to focus on income and only add risk to the portfolio once we have a better idea of how earnings progress.
Short on Time, Long on Stock Info
Lately, we’ve been breaking up our usual hour-long livestreams into quick, easily digestible shorts, like the ones we did for JPM and MS.
Here are a few more must-see topics we covered this week in about 10 minutes apiece…
- Twitter Will Lose to Musk
- Strong Dollar = Lower Profits?
- Consumer Price Index
- Good Jobs Data Is Bad News for Stocks
Our elite trading service, Strategic Trader, covers all the market gyrations and provides information on options trading, insightful technical and fundamental analysis, and market history. We’re there every step of the way to help you make the best moves in the market in bullish and bearish environments.
