Solid Corporate Results and Rising Inflation Boost Stocks

This trading week ends on a high note and excellent sentiment in the market as the U.S. banking sector presented outstanding quarter results beating even the best expectations. Goldman Sachs, JPMorgan, Wells Fargo, Bank of America, BlackRock easily beat Wall Street expectations both on EPS and revenues.

Most remarkable are the results of Goldman Sachs and BlackRock that bet on financial instruments trading. Goldman Sachs EPS in first quarter hit $18.6 vs $10.1 expected. Blackrock’s quarter profit surged by 16% and assets under management grew to a phenomenal $9 trillion, or 40% of the GDP of the United States.

Brilliant start of the first 2021 reporting season. However, stock indices are reluctant to the news. S&P broad market index gained just 0.6% despite even tremendous March retail sales in the U.S. that jumped by 9.8% after falling by 2.7% in February.

However, there is an event that may overshadow bullish sentiment in the market. Jerome Powell surprised market by saying that the central bank will begin to slow the pace of its bond purchases “well before” raising interest rates. Such statement by the Federal Reserve could be shocking and frightening for investors, but not now, amid brilliant reporting season and strong macroeconomic data. So, it might be an explanation for the moderate reaction of the stock market.

On Friday investors would focus on first quarter GDP of China that is expected to jump by 19%, inflation in Eurozone and corporate report of another U.S. banking giant Morgan Stanley that may easily beat analyst expectations too.

The S&P 500 broad market index is set to follow the upside scenario with the target at 4485 points. However, if it runs out of steam the index may continue to consolidate at 4120 points.

Brent crude unexpectedly jumped to $67 per barrel. The only trigger for such jump is crude reserves data in the United States that showed a sharp decline in reserves by 5.8 million barrels. But this is not enough to justify such bold price movements. Prices now are far above weekly resistance at $64.40 per Brent crude barrel.

Gold prices also broke through $1750 per ounce after yield on 10-year U.S. Treasuries stepped back to 1.56%. Gold prices might be attractive for buy positions as long as they are holding above $1750 per ounce.

The Greenback weakened throughout the entire week. The EURUSD is struggling close to the resistance level at 1.19600. At the moment sell positions with targets at 1.18500 are looking favourable. But they should not be left over weekend.

The GBPUSD is targeting the resistance level at 1.38200. Sell positions from this level with targets at 1.37200 are still attractive to open on Friday.

The USDJPY slid below the support level at 109.00 and may continue to decline to 107.60. However, is better to wait for the triggers for such downside movements. Until then it is better to wait with opening any orders.