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“Success is making ourselves useful in the world” – George Dayton, Founder of Target

Morning stock market summary

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Politicians on both sides of the aisle are still talking tough regarding the debt ceiling, but there are signs of progress being made as President Biden has announced that he will cut short his trip to Asia.  In response, futures were rallying ahead of the April release of Housing Starts and Building Permits.  Starts were right in line with forecasts (1.401 million vs 1.400 million) and Building Permits were shy of forecasts (1.416 million vs 1.430 million).  Regarding starts, though, the March reading was revised significantly lower from 1.420 million down to 1.371 million. Building Permits, however, experienced a modest upward revision. Futures are still in positive territory on the news, but off slightly from their pre-release level.

On the earnings front, retailers continue to take center stage, and after yesterday’s report from Home Depot (HD) where the company noted softer sales trends post the SVB collapse, Target (TGT) management had similar comments.

We still have another day left until Walmart (WMT) marks the unofficial end to earnings season, but this morning we wanted to take a quick look at how stocks have recently performed during the earnings ‘on’ and ‘off-seasons.  The red lines in the chart below show the performance of the S&P 500 from the time of JP Morgan’s (JPM) report to WMT.  While the first two earnings seasons of 2020 were not friendly for stocks, the next three were very positive periods for the market. Unlike the last three earnings seasons, performance during the current period has been remarkably sideways. On the surface, the lack of much upside during the current earnings season may be considered a negative signal.  Then again, when you consider the fact that the market started to sell off after each of the last three earnings rallies, maybe the lack of an earnings rally means the odds of a post-earnings hangover are less likely.

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