Stocks Higher Despite Inflation Data, Mixed Earnings Season Start…..

U.S. equities finished solidly higher, showing some resiliency in the wake of yet another hotter-than-expected read on inflation, and as earnings season kicked off amid some mixed results. Prices at the wholesale level for March rose to a record high month-over-month and year-over-year, while Dow member JPMorgan Chase & Co missed earnings estimates but topped revenue forecasts. Meanwhile, Delta Air Lines recorded a smaller-than-expected loss and offered upbeat guidance. In other equity news, PayPal Holdings saw some pressure after Chief Financial Officer (CFO) John Rainey announced he is leaving the fintech company to join Dow member Walmart in the same role. Treasuries rose and yields were lower despite the inflation data, which followed yesterday’s cooler-than-anticipated read on core consumer prices. The U.S. dollar fell, while crude oil prices added to yesterday’s rebound, and gold gained modest ground. In other economic news, mortgage applications fell for a fifth-straight week amid the continued jump in rates. Markets in Europe and Asia were mixed following some inflation data and ahead of tomorrow’s monetary policy decisions from the European Central Bank and the Bank of Korea.

The Dow Jones Industrial Average rose 344 points (1.0%) to 34,565, the S&P 500 Index gained 49 points (1.1%) to 4,447, and the Nasdaq Composite increased 272 points (2.0%) to 13,644. In moderate volume, 3.7 billion shares of NYSE-listed stocks were traded, and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil added $3.65 to $104.25 per barrel. Elsewhere, the gold spot price traded $3.10 higher to $1,979.20 per ounce, and the Dollar Index was down 0.4% at 99.91.

The Producer Price Index (PPI) showed prices at the wholesale level in March rose 1.4% month-over-month (m/m), above the Bloomberg consensus estimate of a 1.1% gain, and north of February’s upwardly-revised 0.9% increase. The core rate, which excludes food and energy, gained 1.0% m/m, above estimates of a 0.5% rise and topping the prior month’s upwardly-adjusted 0.4% rise. Y/Y, the headline rate was 11.2% higher, well above the prior month’s upwardly-adjusted 10.3% rise, and exceeding expectations of a 10.6% gain. The core PPI increased 9.2% y/y last month, besting estimates calling for an 8.4% gain and topping February’s upwardly-adjusted 8.7% increase.

The Department of Labor said goods prices rose, with energy leading the way as diesel fuel prices jumped and gasoline prices also rose, along with fresh and dry vegetables, jet fuel, iron and steel scrap, and electric power. In contrast, prices for beef and veal fell, while natural gas and cold rolled steel sheet and strip prices also declined. Services prices also gained ground, led by trade, which was accompanied by increases in prices for transportation and warehousing services.

The MBA Mortgage Application Index declined 1.3% last week, following the prior week’s decrease of 6.3%. The fifth-straight weekly downturn came as a 4.9% drop in the Refinance Index more than offset a 1.4% gain for the Purchase Index. The average 30-year mortgage rate extended its climb, rising 23 bps to 5.13%, and is up 186 basis points (bps) versus a year ago.

Treasuries rose despite the inflation data and after a recent drop that has seen rates jump and the yield curve steepen. The bond markets have been driven primarily by expectations that the Fed is set to get substantially aggressive with tightening monetary policy to try to combat surging inflation. Recent Fedspeak has been a key contributor to the bond market moves, along with the minutes from the Fed’s March meeting gave details of the balance sheet reduction plan and suggested the potential for multiple rate hikes of 50 bps, which would be the first time it raised rates in excess of 25 bps in over 20 years.

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