Stocks Hit Pause Last Week, But Earnings Season Could Lift Stocks

Plus 5 New Strong Buys for Today Stocks Hit Pause Last Week, But Earnings Season Could Lift Stocks [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Hit Pause Last Week, But Earnings Season Could Lift Stocks [Stocks Hit Pause Last Week, But Earnings Season Could Lift Stocks]Image: Bigstock Stocks were mixed on Friday with the Dow in the green, but the S&P and Nasdaq finished in the red. However, they were all down for the week. Last week's release of the FOMC minutes from the Fed's March meeting generated a fair amount of volatility. The Fed essentially telegraphed that they were leaning towards a 50 basis point rate hike at their next meeting on May 3-4, and that they were likely to begin reducing their record high balance sheet. Stocks fell on the news on Wednesday. Then bounced higher on Thursday. And then traded mixed on Friday. Some worry that raising rates too high and too fast will hurt the economy. But a slowing economy is not the problem. In fact, the economy is too hot, and that's partly why inflation is so high right now. And another half-point rate hike, which would essentially put the Fed Funds midpoint rate at 0.875%, would still be historically low, and not in danger of ruining the economy. Others welcome the rate hike and balance sheet reduction because inflation is the biggest threat to the economy right now. And the higher rates and pared down balance sheet (although still quite accommodative by any standards), will begin to wring some of the excess out of the economy, and tamp down inflation, which in turn should help elongate the economic expansion we're going thru. In fact, Fed Chair Jerome Powell, thinks the economy will "flourish in the face of less accommodative monetary policy." So ultimately, I believe the Fed's next move on rates and their balance sheet unwind, will be cheered once it's done. Earnings season will pick up some steam this week with another 87 companies reporting. Next week, however, marks the official start of earnings season when Alcoa reports after the close on April 20th. We'll get 286 companies reporting next week. And then it will really start kicking into gear. Earnings season is always an exciting time since stocks typically go up during earnings season. In the meantime, stocks will look to regroup and form a base after last week's losses and the previous 3 weeks of sharp gains. In spite of recent volatility, high inflation, and worries over the war on Ukraine -- the fact of the matter is that the economy is strong, the labor market is strong, corporate earnings are strong, household income is strong, and consumer spending is strong. And that suggests there's a lot more upside to go for both the economy and the market. 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