Stocks End Mixed, Banks Pass Stress Test

Plus 5 Just-Added Strong Buys Stocks End Mixed, Banks Pass Stress Test [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Mixed, Banks Pass Stress Test [Stocks End Mixed, Banks Pass Stress Test]Image: Bigstock Stocks closed mixed yesterday with the Nasdaq, small-cap Russell 2000, and mid-cap S&P 400 ending modestly in the green, while the Dow and the S&P500 ended modestly in the red. Reports that the U.S. is considering restricting some AI chips to China weighed on stocks early on. The U.S. already requires companies to obtain licenses to export certain semiconductors to China. The new proposal would broaden those export controls. Nothing is final yet. But there's speculation it could be ready to go as early as July. Fed Chair, Jerome Powell, while participating in a discussion at the European Central Bank (ECB) Forum on Central Banking, in Sintra, Portugal yesterday, reiterated that more rate rises are likely for the U.S. if inflation continues to run hot. No surprise as his comments were consistent with what he said at the last FOMC meeting earlier this month. After the close, the Fed released their annual bank stress test report. And all of the participating banks passed with room to spare. The test looks at how the banks would fare (how much capital they would have left over) if unemployment rose to 10% and the stock market fell by -45%. Pretty extreme scenario. It showed the anticipated losses these banks could absorb while still being able to lend and meet its financial obligations. And they all showed capital ratios well above the Fed's threshold. The Fed's Vice Chair of Supervision, Michael Barr, said that "today's results confirm the banking system remains strong and resilient." He was quick to point out, however, that "this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses." Nonetheless, the banks performed well on this year's stress test. In other news, MBA Mortgage Applications were up 3.0% w/w with purchases up 2.8% and refi's up 3.3%. Retail Inventories were up 0.8% m/m vs. last month's pace of 0.2% and views for 0.3%. Wholesale Inventories were down -0.1% m/m, an improvement from last month's -0.3% change, but just under the consensus for a flat reading of 0.0%. The Survey of Business Uncertainty showed U.S. firms expect sales growth to increase by 4.98% over the next 12 months, which is an upward revision from last month's estimate for 4.70%. They also expect employment growth to moderate a bit to 4.34% from last month's estimate of 4.54%. And the State Street Investor Confidence Index rose 6.1 points to 95.8 vs. last month's 89.7. The European component rose 5.0 points to 104.9. North America increased by 4.9 points to 90.0. While Asia fell by -4.3 points to 96.7. Today we'll get the 3rd and final estimate for Q1'23 GDP. The consensus is for a slight uptick to 1.4% vs. last month's 2nd estimate of 1.3%. Although, investors have already shifted their focus to Q2, which, according to the Federal Reserve Bank of Atlanta's GDP Now forecast, is expected to come in at 1.8%. We'll also get Weekly Jobless Claims, Pending Home Sales, and Corporate Profits. Then tomorrow is the report everyone's been waiting for – the Personal Consumption Expenditures (PCE) index. This is the Fed's preferred inflation gauge. A hot report is likely to trigger plenty of hawkish comments on rates, while a moderating report is likely to spark dovish comments. In the meantime, stocks are up for the week with two more days to go. 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