Last week closed out April on a strong note. And over the weekend, there was even a relatively orderly “acquisition” of First Republic Bank (J.P. Morgan will be the acquirer). While this represents a positive resolution for markets, it is still a sign of the ramifications of higher interest rates and the tighter current lending environment.
The strength in markets and calmness on the surface has been evidenced by the VIX marking a new 1-year low last week and reaching its lowest level since November 2021.1 One other data point to watch is 1-year credit default swaps on the U.S., which continued to gap higher on Friday to approximately 175 basis points (bps) — compared to 77 bps in 2011 when the U.S. was actually downgraded.2
The week ahead will be packed with more earnings and two crucial central bank decisions, from the Federal Reserve on Wednesday and the European Central Bank on Thursday.3 This morning, we will get ISM Manufacturing Prices Paid data, while tomorrow will bring an update from the Job Openings and Labor Turnover Survey. And this Friday will bring new information regarding payrolls and the unemployment rate.4 Additionally, we can expect another packed week of corporate earnings, which have thus far been stronger than expected.5
1CNBC – Fear gauge breakdown means stocks are set to break out, says top chart analyst Katie Stockton; 4/26/2023
2Bloomberg Terminal; 4/28/2023
3European Central Bank – Schedules for the meetings of the Governing Council and General Council of the ECB and related press conferences; 5/1/2023
4MarketWatch – U.S. Economic Calendar; as of 5/1/2023
5Kiplinger – Kiplinger's Weekly Earnings Calendar (May 1-5); 5/1/2023
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