Important earnings season ahead as investors look for signs that we are still in soft landing territory despite persistently strong economic data that’s helping to delay rate cutsBanks on deck this week: investors hoping for improved lending, investment banking conditions, but headwinds still persistAfter Breaking Records in Q1, Major Indices Kick Off Q2 on a Tepid NoteNasdaq Composite
Markets moved another leg lower this week in response to the higher-than-expected Consumer Price Index reading for March which showed an increase of 0.4%. This increase puts the 12-month inflation rate at 3.5%, well above the 2% target the Fed would like to move towards before cutting rates.Investors have some positives to look forward to this week, however, as Q1 earnings season kicks off with healthy looking estimates.
Buyback announcements for the first quarter of 2024 clocked in at 228, the highest level since Q4 2021 recorded 376 repurchase announcements . This is also the first quarter to record more than 200 repurchase announcements, with every quarter of 2022 and 2023 logging below that amount.In the same vein, dividend increases in Q1 2024 were at their highest level since before 2018. In Q1 2024, a total of 1,639 companies increased dividends vs. 542 which decreased dividends.
The same headwinds and tailwinds are in play for banks this year as in 2023. High interest rates still help banks maintain healthy levels of net interest income, but on the flipside have negative implications when they lead to loan defaults from borrowers that can no longer contend with higher costs. The promise of lower interest rates had fueled a rally in the banks this year, but with a tight labor market and stubbornly high inflation readings, that expectation has sputtered.