Stocks were volatile Thursday as investors took in more inflation data and considered how it could impact the Federal Reserve's plans for interest rates. Wall Street also looked ahead to first-quarter earnings season, which unofficially kicks off tomorrow as several big banks report.
Following Wednesday's hotter-than-expected March Consumer Price Index (CPI) – which sent stocks into a tailspin – investors cheered some encouraging aspects of this morning's Producer Price Index (PPI).
Specifically, data from the Bureau of Labor Statistics showed the PPI, which measures what businesses are paying suppliers for goods, rose 0.2% month-to-month in March. This was the slowest monthly increase since November and lower than economists anticipated. On an annual basis, though, headline PPI was up 2.1%, the quickest pace since April 2023.
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The increase in core PPI, which excludes volatile food and energy prices, also slowed on a monthly basis (0.2% vs February's 0.3%), but increased year-over-year (2.8% vs February's 2.7%).
"Although today's PPI reading was constructive, we believe that investors should be prepared for fewer Fed rate cuts this year, one or two, and for a first potential rate cut not until the July meeting," says Larry Tentarelli, president and founder of Blue Chip Daily Trend Report.
Several Federal Reserve officials, including Boston Fed President Susan Collins, sounded off on inflation and interest rates after today's PPI report. In a speech to the Economic Club of New York, Collins said recent inflation data highlights "uncertainties related to [the] timing" of rate cuts and reiterates "the need for patience."
Nike gets upgraded to Buy at BofA
In single-stock news, Nike (NKE) popped 3.4% after BofA Securities analyst Lorraine Hutchinson upgraded the Dow Jones stock to Buy from Neutral (the equivalent of Hold).
"Nike is currently trading at historic trough levels compared to the S&P 500," Hutchinson writes in a note to clients, adding that "this is unwarranted for a strong brand with solid growth prospects." The analyst notes that while China remains a risk for Nike, the company is taking bold steps to transform and it could benefit from this year's Summer Olympics.
Hutchinson also says analysts' estimates are bottoming and the BofA team "would rather own Nike when consensus calls for a mid-single-digit growth rate" versus elevated expectations.
CarMax skids after earnings
Elsewhere, CarMax (KMX) plunged 9.2% after the used car retailer reported earnings. For the three months ended February 29, the company disclosed earnings of 32 cents per share on $5.6 billion in revenue. Analysts, meanwhile, were anticipating earnings of 46 cents per share on $5.8 billion in sales.
CarMax also pushed back its deadline to sell more than 2 million vehicles (both retail and wholesale), now expecting to reach this goal between fiscal 2026 and fiscal 2030 vs its previous forecast of fiscal year 2026.
As for the main indexes, the Nasdaq Composite outperformed, adding 1.7% to 16,442, thanks to strength in several Magnificent 7 stocks including Alphabet (GOOGL, +2.1%), Apple (AAPL, +4.3%) and Nvidia (NVDA, +4.1%). The S&P 500 rose 0.7% to 5,199, while the Dow Jones Industrial Average finished marginally lower at 38,459.
Earnings season starts tomorrow
Looking ahead, the Q1 earnings calendar starts to heat up tomorrow with several of the country's largest banks set to report. Among them is JPMorgan Chase (JPM, -0.02%), which is expected to see modest year-over-year declines in earnings and revenue.
According to John Butters, senior earnings analyst at FactSet Research Systems, the estimated Q1 earnings growth rate for the S&P 500 is 3.2%. If this is the actual growth rate, it will mark the third straight quarter of year-over-year earnings growth for the index, Butters adds.
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