Inflation Eases, S&P 500 Cools As Banks Kick Off Q1 Earnings Season

The SPDR S&P 500 ETF Trust SPY logged a weekly gain following encouraging inflation data and a stronger-than-expected start to first-quarter earnings season.

On Wednesday, the Labor Department reported the consumer price index gained 5% in March, down from a 6% increase in February and below economist estimates of a 5.2% gain. Core CPI inflation, which excludes volatile food and energy prices, was 5.6% in March, in-line with economist estimates.

Related Link: US Inflation Rate Slows More Than Predicted In March: Markets Rally As The End Of Fed Hike Cycle Looms 

The Federal Open Market Committee also released its March meeting minutes on Wednesday, and the Fed's language suggested the recent banking crisis could trigger a U.S. recession later this year. The latest Federal Reserve staff projections indicate a "mild recession" in 2023 and a "recovery over the subsequent two years."

In a new interview on Wednesday, legendary billionaire investor and Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) CEO Warren Buffett said there's likely more bank failures to come following the March collapses of Silicon Valley Bank and Signature Bank, but there's no reason for depositors to panic. "Banks go bust, but depositors aren’t going to be hurt,” Buffett said.

Related Link: Warren Buffett 'Has Not Been Buying The Banks,' Despite Million-Dollar Bet, Market Analyst Says

Bitcoin BTC/USD prices topped the key psychological level of $30,000 for the first time since June 2022 on Monday. Encouraging inflation data and tightening credit markets have investors anticipating the Federal Reserve will pivot from rate hikes to rate cuts sooner than previously expected, which is bullish news for cryptocurrencies and other risk assets.

Money In The Bank: JPMorgan Chase & Co JPM shares jumped Friday after the bank reported record revenue in the first quarter and boosted its 2023 net interest income guidance by $7 billion.

In the week ahead, investors will get more quarterly reports from Bank of America Corp BAC on Tuesday, Tesla Inc TSLA on Wednesday and Taiwan Semiconductor Mfg. Co. Ltd. TSM and AT&T Inc. T on Thursday.

Analysts are anticipating a more than 10% drop in first-quarter earnings in the S&P 500 communication services, information technology, health care and materials sectors, according to FactSet.

Economic Numbers: Following the March CPI inflation data, Wall Street will get more international economic updates on Monday when the National Bureau of Statistics of China releases its first-quarter GDP growth estimate and on Thursday when the People's Bank of China announces its latest interest rate decision.

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