The main reason for the decline in the stock market was a slightly higher-than-expected March consumer price index (CPI) report, which pushed up Treasury bond yields and led investors to reconsider the number of interest-rate cuts from the Federal Reserve. With the economy still performing well, it is less likely that the central bank will make three rate cuts this year. The CME FedWatch Tool suggests that two cuts are most likely, with a chance that there may be no cuts at all. Despite this, the focus remains on a strong economy, as low rates may help with valuation multiples, but it is a robust economy that leads to earnings growth, which is crucial for long-term investors.
Heightened tensions in the Middle East, particularly the possibility of Iran attacking Israel, also contributed to the stock market fluctuations, sending stocks down and oil prices higher. However, it is emphasized that investment decisions should not be based solely on rate-cut expectations, as the focus should be on taking advantage of market dislocations and investing in a strong economy. Looking ahead to the next week, key macroeconomic reports, along with earnings reports from three major companies in the portfolio, will be closely monitored to gauge the market’s performance.
In terms of macroeconomic reports, March retail sales data will provide insight into private consumption trends and the overall economy’s strength, influencing the Federal Reserve’s decisions on interest rates. The housing starts and building permits report will shed light on shelter costs, a significant factor in overall inflation. The March industrial production report will provide information on manufacturing and end-market demand, impacting the supply chain’s production and utilization. Additionally, earnings reports from three major companies, including Morgan Stanley, Abbott Labs, and Procter & Gamble, will be important drivers of market action for the week.
Morgan Stanley is expected to benefit from strong investment banking results and higher equity prices, with a focus on wealth management margins. Abbott Labs’ organic growth and key segment performance, particularly in nutrition, pharmaceuticals, and medical devices, will be closely watched. Procter & Gamble’s growth in key segments and pricing power, along with consumer behaviors in response to value products, will be key considerations in investors’ analysis. Each company’s earnings report will provide valuable insights into the overall market and economic trends.
The week’s schedule includes various macroeconomic reports, such as retail sales, housing starts, building permits, and industrial production, in addition to earnings releases from a range of companies. Investor attention will be on the key economic indicators and corporate earnings as they assess market trends. As part of the CNBC Investing Club with Jim Cramer, subscribers receive trade alerts and insights on market movements to make informed investment decisions based on the latest information and trends. The focus remains on a strong economy, earnings growth, and long-term investment strategies amid market fluctuations and uncertainties.
