Stocks rebound as yields decline, JPMorgan struggles with inflation and suffers Ukraine loss, Delta’s tremendous demand, BOC leading aggressive tightening race, bitcoin holds $40,000

Earnings season is here and so far the takeaway is that the short-term outlook for the economy is pretty good and that the consumer is handling widespread price increases. US stocks are rebounding as the bond market selloff appears to be over for now.  Fed rate hike expectations will get tested in the coming months and many traders are concerned that geopolitical and inflation risks will force them to be less aggressive with monetary tightening later this year.

Delta

Delta’s quarterly results impressed, with a smaller-than-expected loss and robust revenue beat.  Delta had a great month in March, which was the first time monthly revenues were better than before the pandemic.  Delta Airlines touted robust consumer demand that is accepting higher fares and helping them offset the increase with fuel prices.  Delta’s tremendous demand was expected, but not this good. This will be an amazing couple quarters for Delta, but widespread inflation will eventually weigh on consumers accepting higher fares.

JPMorgan drops on Ukraine

JPMorgan is optimistic about the economy in short-term, but significant geopolitical and economic challenges are right around the corner.  Investment banking disappointed and credit loss provisions rose. Buybacks were not enough of a reason to buy the stock. A first-quarter $902 million net reserve build was needed to protect from downside risks due to high inflation and the war in Ukraine.  Trading was mixed, loan growth was heading in the right direction, but the hit from the war in Ukraine and commodity market volatility ultimately sent JPMorgan share prices lower.

BOC

The Bank of Canada delivered a super-sized rate hike as policymakers try to tackle inflation.  Currency traders are bracing for a very aggressive monetary tightening campaign by the BOC as they signaled they are very far away from the neutral rate.  Quantitative tightening will include the end of replacing federal bonds as they focus on getting the balance sheet under control later this month.

The BOC is the first major central bank to deliver a super-sized 50 basis point rate hike and they won’t be the last.  The Canadian dollar was slightly higher against the dollar following the policy decision.

Bitcoin 

Bitcoin needs to be showing more signs of life if Treasury yields continue to decline.  A lot of the institutional money is seeing better volatility in equities and commodities and that might prevent some of the momentum buying that we normally see after bitcoin defends a key technical level.  The USD 40,000 level remains key for bitcoin and that should hold if risk appetite holds up.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya