U.S. equity futures held gains and Treasuries retreated after a batch of data showed signs of a slowdown in the American economy – think stagflation – alongside a rise in a key inflation measure.
Richard Henderson for Bloomberg News:
Contracts on the S&P 500 rose amid strong corporate earnings and data showing economic growth slowed more than forecast last quarter, perhaps giving the Federal Reserve reason to consider pausing rate hikes after its next meeting.
Countering that was a reading on inflation that came in higher than expected.
The mixed data follows a strong start to the first-quarter earnings season that had boosted confidence corporate America is coping relatively well with price pressures and policy tightening.
“We are seeing heavier reactions in tech as firms are beginning to bear the fruit of earlier cost efficiencies,” Lewis Grant, senior portfolio manager for global equities at Federated Hermes, wrote in a note to clients. “Investor sentiment remains every bit as fragile as the global economy and earnings season provides much needed visibility on the general health of firms.”
For those of you who are unaware or were not alive during the last bout of stagflation in the last century (mid to late 70’s), let me enlighten you…It ain’t pretty. Stagflation is the combination of slow growth, high prices, and high unemployment. Let me repeat that. Slow Growth, High Prices (inflation), and High Unemployment.
In other words, we have now gone from “bad news is good news” to “bad news may in fact be bad news.” We have gone from being preoccupied about another banking crisis to focusing on the risk of recession (which is what we should always have been focused on frankly).
What did everyone really think was going to happen after 13 years of stimulation and zero interest rates? I said this before and I’ll say it again: It took us 13 years to get here and anyone who thinks we are getting out of this in 12 – 16 months needs to go back to school and study Econ 101, 201 and 301. Then let’s have a conversation.
MacDailyNews Take: The chickens, what’s left of them, always come home to roost eventually.
MacDailyNews Note: Apple is scheduled to report second fiscal quarter results on Thursday, May 4, 2023 after the bell, right around 1:30 p.m. PT / 4:30 p.m. ET.
As always, we’ll have Apple’s results on May 4th right around 1:30 p.m. PT / 4:30 p.m. ET. followed by live notes from Apple’s conference call beginning at 2:00 p.m. PT / 5:00 p.m. ET.
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