By Bill Hornbarger, Chief Investment Officer
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Three Things to Watch
- Inflation will be the major focus of the week with both CPI and PPI to be released. Inflation has been slowly trending lower in recent months but the April report for CPI is expected to be up a robust 0.4% from the previous month and 5% on a year-over-year basis. The Fed has stressed that while progress has been made, inflation remains too high and the committee stands ready to continue to raise interest rates if necessary.
- This week could prove key in the debate surrounding the debt ceiling. Treasury Secretary Yellen has indicated that the U.S. could run out of money to pay its bills in early June if nothing has been done and a “steep economic downturn” could result from a failure to act. President Biden meets with the top four congressional leaders on Tuesday as the parties attempt to break the current stalemate.
- The regional banking sector will remain in focus after the third regional bank failure since March happened last week. Regional bank stocks have been under pressure most of this year but were strong on Friday and appear to be attempting to stabilize. The S&P Regional Bank Index is down 34% for the year, and over 40% the past three months.
Three Things to Know
- With 428 of the S&P 500 companies reporting this quarter, earnings are running ahead of consensus. Positive surprises (78%) outpace negative surprises (19%) by a wide margin and the aggregate surprise is +6.63%. (Source: Bloomberg)
- Last week the Federal Open Market Committee increased interest rates to 5.125%, marking the 10th consecutive meeting it raised rates, leaving them at the highest level since 2007. (Source: Haver)
- With the latest increase by the Fed, the Fed funds rate (5.125%) is now above CPI (5%), a very infrequent occurrence since the end of the Global Financial Crisis in 2009. (Source: Haver)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.