Indices ahead on good Tech earnings, shrug off Banking woes

Indices shrugged off bad news from the banking sector (government is unwilling to intervene in the rescue of First Republic Bank, news reports suggest) and focused on good the tech sector (a favorable earnings report from Microsoft this morning), but in the next few weeks it’s still all eyes on economic data ahead of next week’s Federal Reserve meeting. Today’s reports showed that core durable goods orders fell and retail stocks rose in March, hinting at a weaker economy.

We'll get our first read on the first quarter GDP growth tomorrow, along with updated weekly jobless claims data, Personal Consumption Expenditures Price (PCE) inflation data on Friday morning, together with consumer sentiment data and employment cost data that reflects wage inflation trends.

Indices up, Dollar down

• At the time of writing, the broad S&P 500 and NASDAQ indices were up 0.3% and 1.2%, respectively, at 4084 and 11,946
• The VIX, Wall Street’s fear index, edged down to 17.9 indicating a sanguine mod
• The dollar index was down 0.5% at 101.1, with the euro and sterling up half a percent against the dollar
• Yields on 2- and 10-year Treasuries fell to 3.95% and 3.44%, respectively

Gold sticks at $2K mark

• Gold prices hovered around the $2,000 per ounce mark, a bullish sign after recent upward moves
• Crude oil prices were unchanged at $77 per barrel, off session lows after closing the chart gap earlier today that goes back to the surprise April 3 announcement from OPEC+ that it was cutting output in May
• The grain and oilseed sector was mixed this morning, with corn and wheat prices under modest pressure, while soybeans saw modest gains

Core durable goods fell in March

• Durable goods orders rose 3.2% month-on-month in March, tripling analyst expectations of 0.9% growth and a reversal of the 1.2% decline seen in February – but this wasn’t the whole story
• Much of the gain was due to volatile transportation orders, and durable goods orders less transportation rose 0.3% month-on-month in March, still beating expectations of a 0.2% decline
• Core capital goods orders, ex all volatile items, which tends to reflect the health of the business sector, fell 0.4% month-on-month in March, versus analyst expectations that they would grow by 0.2%

Retail stocks rose sharply in March, but why?

• Retail inventories grew in March, echoing recent strength in retail sales; but this could either be because retailers are optimistic about futures sales they want to build inventory; or, as seems more likely, sales are starting to fall below expectations, leaving goods accumulating on the store shelf
• Retail inventories rose 0.7% month-on-month in March, according to today’s advanced data report, ahead of expectations
• Wholesale inventories rose 0.1% month-on-month in March, down from analyst expectations of 0.2% and matching the previous month’s pace

Investor confidence up in North America

• State Street’s investorconfidence index for April rose to 83.5, up from 81.3 the previous month. The North American index rose 1.6 points this month to 75.5, while the European index fell 6.4 points to 111.2, and the Asian index dropped 2.6 points to 89.3
• The index assesses the levels of risk in investment portfolios as indicated by changes in investor holdings of equities – logically, investors tend to put more money into equities when their confidence is high, and pull money out when confidence is low

Oil inventories fell across the board

• US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve), fell by 5.1 million to 460.9 million barrels in the week ending April 21, 1% below the five-year average for this time of year
• Gasoline stocks fell 2.4 million barrels, and they are now about 7% below seasonal levels
• Distillate stocks dropped by 0.6 million barrels, putting them 12% below where we would typically see them this time of year

Analysis by Arlan Suderman, Chief Commodities Economist

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