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Market Snapshot: Stocks finish near session highs as bond yields slip and Fed’s Waller says inflation may have peaked

U.S. stocks were higher midday Wednesday, led by Nasdaq as bond yields slipped on hopes inflation may have peaked, despite disappointing earnings from JPMorgan Chase & Co.

Stock-market bulls are looking for corporate earnings reports to take the focus away from the surge in inflation that has ratcheted up Federal Reserve interest rate-hike expectations and has sent Treasury yields sharply higher so far this year.

What’s happening

The Dow Jones Industrial Average
DJIA,
+0.78%

was up 203 points or 0.6%, at 34,423.

The S&P 500
SPX,
+0.96%

rose 36 points, or 0.8%, at 4,433.

The Nasdaq Composite
COMP,
+1.86%

jumped 225 points, or 1.7%, to 13,596.

On Tuesday, the Dow, S&P 500 and Nasdaq Composite erased strong early gains to end lower.

What’s driving markets

Treasury yields were in retreat Wednesday, providing some support for technology stocks and the Nasdaq Composite index as investors wagered on a peak in U.S. inflation, despite a rise in March wholesale prices.

The U.S. producer price index, which measures the cost of wholesale goods and services, jumped 1.4% in March largely because of higher gas and food prices, signaling that U.S. inflation is likely to stay near a 40-year high through the spring. Economists polled by The Wall Street Journal had forecast a 1.1% gain. The increase in wholesale prices over the past year jumped to 11.2%, from 10% in the prior month — the highest level since the early 1980s.

The PPI reading comes a day after the U.S. Labor Department reported the strongest year-over-year rise in U.S. consumer prices in 40 years, at 8.5%. The CPI data showed a 0.9% drop in durable-goods inflation, at the same time there was a 0.7% gain in services inflation, both evidence of a normalizing economy after pandemic supply disruptions.

“These core inflation dynamics suggest that underlying price pressures are peaking in the U.S.,” said analysts at BCA Research.

Read: This stock-market indicator says investors don’t think inflation has peaked: analyst

U.S. Treasury Secretary Janet Yellen said Wednesday that she was more worried about the prospects of a recession in Europe, given the impact of the war in Ukraine, but that the Federal Reserve also would need luck and skill to maintain a strong labor market while bringing inflation down. “It has been done in the past. It’s not an impossible combination,” Yellen said, in a talk at the Atlantic Council.

The U.K. reported the fastest inflation rate in 30 years, and the Reserve Bank of New Zealand made a bigger-than-forecast half percentage point interest rate hike. The Bank of Canada also raised its benchmark interest rates by a half point Wednesday.

Meanwhile, the first-quarter U.S. earnings reporting season got underway as investors digested results from JPMorgan Chase & Co.
JPM,
-3.21%
,
as well as Delta Air Lines Inc.
DAL,
+6.40%
,
BlackRock Inc.
BLK,
-0.14%
,
and others.

JPMorgan Chase shares fell 4% to lead Dow decliners after the bank reported lower first-quarter profit that missed Wall Street’s estimate, and cast some gloom on the financial sector.

“JP Morgan’s Q1 earnings are the fairly dull bookend to a golden two-year period in banking,” said Octavio Marenzi, CEO of Opimas LLC, a capital markets consulting firm, in emailed comments.

“During the pandemic, [return on equity] hovered close to 20%. Investment banking and trading did magnificently well, while loan losses remained extremely low. Now, with rising interest rates, JP Morgan’s earnings got clobbered, falling by over 40%. This is going to be the new normal in banking for the foreseeable future,” he said.

Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, noted that consensus earnings expectations for the S&P 500 this year have actually moved higher, to $230 in April from $224 in January.

“Given the myriad headwinds faced by companies in the first quarter and the year ahead, we think first-quarter reporting season has the potential to be a mess. But we also see the potential for it to not be as bad as feared, given the likelihood that buy-side expectations are much lower than official sell-side forecasts – as long as robust assessments of underlying appetite/demand remain in place,” she said.

Companies in focus

Shares of BlackRock, the world’s largest asset manager, were flat after it reported net income that topped expectations.

Delta shares rose 4.3% after reporting stronger-than-forecast results, lifting other airlines including American Airlines Group Inc.
AAL,
+10.13%
,
which was up 8.9%. The popular U.S. Global Jets ETF
JETS,
+5.33%

rose 4.4%.

Shares of Bed Bath & Beyond Inc.
BBBY,
+0.47%

advanced 3% after the retailer reported a surprise fourth-quarter loss and missed on sales.

How other assets are trading

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.678%

fell 6 basis points to 2.67%. Yields and debt prices move opposite each other.

The ICE U.S. Dollar Index
DXY,
-0.35%
,
a measure of the currency against a basket of six major rivals, was down 0.4%.

Bitcoin
BTCUSD,
+3.91%

rose 5% to trade back above $41,000.

Oil futures extended a rebound to push the U.S. benchmark
CL.1,
+2.40%

up 2.4% to trade near $103 a barrel. Gold futures
GC00,
+0.32%

were up 0.4% above $1,983 an ounce, on track for a fifth straight daily gain.

The Stoxx Europe 600
SXXP,
+0.03%

ended fractionally higher, while London’s FTSE 100
UKX,
+0.05%

was up 0.1%.

The Shanghai Composite
SHCOMP,
-0.82%

fell 0.8%, while the Hang Seng Index
HSI,
+0.26%

rose 0.3% in Hong Kong and Japan’s Nikkei 225
NIK,
+1.93%

jumped 1.9%.

–Steve Goldstein contributed reporting

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