Image source: Pixabay

We came into today expecting three somewhat important market news items. All disappointed, but investors clearly don’t care.

Bank earnings led the way. The three largest to report, JPMorgan (JPM), Wells Fargo (WFC), and Citibank (C), all beat their consensus EPS targets but all traded lower throughout most of the morning. As we have seen all too many times before, when stocks are priced to relative perfection – JPM fits that bill – investors look beyond the obvious and dig deeper. It’s sometimes as though they are looking for an excuse to sell. It is something different in each company’s case, but the theme remains the same.

Then came the Producer Price Index report, which featured a series of misses. The headline number rose by 0.2% on a monthly basis, above the 0.1% consensus, and the core was a somewhat stunning 0.4% rise, well above the 0.2% consensus. It would seem as though the CPI giveth and the PPI taketh away, at least in the bond market, but Treasury yield actually fell slightly. The bond market’s momentum remains quite solid, apparently.

Finally, at 10 am EDT, we received the latest sentiment report from the University of Michigan. Put simply, they stunk. Sentiment came in at 66.0 (vs. 68.5 consensus), Current Conditions were 64.1 (vs. 66.0 exp), and Expectations were 67.2 (vs. 69.3). Survey data of this type is hardly the most consequential, but it fits in with the recent theme that consumers seem to be getting a bit more nervous and tightening the grip on their wallets.

Yet none of these outweigh the impulse for tech investors to buy the dip. Semiconductor stocks are about 1.7% higher (SOX), leading the Nasdaq 100 (NDX) to a 0.7% gain. It hardly recoups yesterday’s losses, but the combination of a broad-based rally along with participation from technology stocks is allowing the S&P 500 (SPX) to recoup most of its prior losses today with its own 0.7% rally. This comes amidst a broad-based rally with NYSE advancers leading decliners by about 3:1 and the Russell 2000 (RTY) is up about 1%.

It’s a risk-on day despite the news flow, the flip-side of yesterday’s activity. One day did not make a trend yesterday, nor does today’s activity either. That said, today’s activity is much more in line with what we have seen for most of this year. But the bank results raise an important concern as we enter earnings season. We’ve gotten quite accustomed to companies beating their analyst consensus estimates. Roughly 75-80% do so each quarter. If the recent rally has raised expectations so high that even earnings beats are not rewarded, that could pose a problem for investors – especially if the “wrong” stocks get tripped up trying to jump over a raised bar.

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