Mid-Week Market Minute 4.17.24

Stocks Trend Lower; Focus Turns to Earnings Reports

Stocks trended lower in early trading this week as inflation worries overshadowed a relatively upbeat start to earnings season. Strong earnings results from UnitedHealth (UNH) helped lift the Dow on Tuesday, as shares of the healthcare giant rallied more than 5%. UnitedHealth has an outsized impact on movements in the Dow Jones Industrial Average, accounting for more than 8% of the index.

Still, comments from Fed Chair Jerome Powell on Tuesday weighed on market sentiment, highlighting the lack of progress on inflation so far this year. In his remarks, Powell noted “more recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning inflation to our 2% goal.” Regarding the timing of rate cuts, Powell noted it is likely to take “longer than expected” for the central bank to feel confident inflation is well on its way back to 2%. As of Wednesday morning, futures markets are expecting one to two rate cuts for the remainder of 2024, which would leave the fed funds rate around 5% by year-end.

Looking ahead, earnings will remain at the forefront over the next several weeks. With valuations near the upper end of their historical ranges, investors have been pricing in relatively optimistic earnings results. According to FactSet, first-quarter earnings are expected to show year-over-year growth of more than 7% in the first quarter.

Source: GSAM, CNBC, JPMorgan

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