Key Takeaways
- Nasdaq Composite Closes At All-Time Highs
- Bank Stocks Get Earnings Started
- Gold And Silver Continue Rallying
Stocks surged higher Thursday, led by technology stocks. The S&P 500 advanced 0.74%, putting it roughly flat for the week. The Nasdaq Composite, which is now up 1% this week, gained 1.68% and closed at a new all-time high. A slightly weaker than expected Producer Price Index report eased concerns over inflation and may have also helped cement the outlook for interest rates.
As I wrote on Wednesday, higher interest rates tend to be a negative for growth companies more reliant upon borrowing costs. While lower rates would certainly be a buoy to tech companies, we could also be seeing a market complacent about current interest rates. Rates at these levels are unlikely to slow growth, and perhaps not being a growth hinderance is nearly as good as lowering rates. It’s that second part of the equation which still needs answering and we began getting part of that answer this morning with the beginning of earnings season.
BlackRock, JP Morgan, Citibank and Wells Fargo are all due out with earnings this morning. BlackRock reported a record for assets under management with $76 billion in net inflows. The company beat on both earnings and sales, sending those shares higher by 2.5% in premarket trading. Meantime, JP Morgan shares are down about 3.5% in premarket. That comes despite a beat on both the top and bottom lines. However, in their comments, Jamie Dimon warned there could still be potential unforeseen headwinds with respect to monetary policy causing expenses to increase. Wells Fargo issued a beat on both the top and bottom lines when they reported their earnings. The company did not offer any updated guidance and those shares are flat in premarket activity. Citibank earnings are also due out this morning, but as of this writing they have yet to report. One other story in the banking sector, non-earnings related, is Morgan Stanley. Government agencies have launched an inquiry into their wealth management division.
Chip stocks are coming under pressure this morning following China’s Ministry of Industry and Information Technology telling telecom carriers to phase out the use of foreign chip processors. This is just the latest move by China to push back on the use of American made technology. The country has also cut out the use of foreign-made mobile phones by state agencies. Intel and Advanced Micro Devices are the two chip companies supplying the majority of networking equipment processors according to The Wall Street Journal. Shares of AMD are down in premarket by a little more than 1.5% while Intel shares are down closer to 2.5%.
While the rally in stocks on Thursday was impressive, I don’t think we’re necessarily out of the woods just yet. Part of my reason for thinking that is the rally we continue seeing in metals. Gold is up 3% this week and silver is up 5%. We usually see prices in precious metals move higher either as an inflation hedge or when investors are becoming cautious. I believe what we’re seeing is a little bit of risk off trading, pending more earnings, specifically tech earnings. Usually, you would see bonds and gold move together; however, I think the uncertainty over interest rates has, at least temporarily, upset that relationship.
Finally, back to earnings. Goldman Sachs will report before the open on Monday and then we’ll hear from companies like Bank of America, UnitedHealth Group and Johnson and Johnson before the open on Tuesday. First quarter earnings are not only a chance to compare earnings on a sequential or yearly basis, but it is also the time when companies provide full year guidance. In light of the interest rates variable, I’ll be particularly interested in hearing what these companies have to say moving forward and how big of a potential impact unchanged interest rates might have. As always, I would stick with your investing plans and long term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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