Markets are digesting a raft of news from US inflation data to potential for wider conflict in the Middle East, with earnings season also poised to start for American companies. Oil resumed gains as Israel braced for a potential strike by Iran or its proxies.

“Overall, there’s a lot of uncertainty right now for markets to deal with,” said Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank in Singapore. “Spots of sticky inflation are lingering uncomfortably despite elevated global rates. Geopolitical troubles mean unwelcome energy-led shocks persist.”

The 10-year Treasury yield fell about three basis points Friday after rising around 22 basis points in the previous two sessions. Data Thursday showed US producer prices in March increased less than forecast, after consumer-price growth came in hotter than expected earlier in the week.

Some sticky inflation readings have prompted market players to slash Federal Reserve rate-cut bets. Swaps traders now see around 43 basis points of cuts from the Fed in 2024 versus roughly 65 basis points before the CPI release. 

US corporate earnings are also in focus as several major banks will report on Friday, including JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. 

Wall Street projects S&P 500 members will show 3.8% annual growth in earnings per share for the first-quarter reporting period, data compiled by Bloomberg Intelligence show. Profits for the “Magnificent Seven” cohort — Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Meta and Tesla — are on course to rise 38% in the first quarter, according to BI.

US futures were steady after the S&P 500 climbed on Thursday, while the tech-heavy Nasdaq 100 closed over 1.5% higher. A solid economy is expected to fuel a rise in profit growth for US companies — and strong margins from Big Tech will be a key driver.

“It’s not going to be Federal Reserve rate cuts that drive the market going forward, rather it’s going to be earnings,” said George Ball, chairman of Sanders Morris. “Corporate earnings are much stronger than people have anticipated even in this elevated interest-rate environment.”

Equities in Asia traded mixed. Japanese stocks climbed, while Australian, South Korean and Hong Kong shares traded lower. Chinese counterparts fluctuated. 

Traders will continue to monitor the yen after Japanese authorities warned they will consider all options to combat weakness in the currency after it slumped to the weakest level against the dollar since 1990. It was little changed on Friday.

Investors will also be closely watching the offshore yuan after it advanced against the greenback for a fourth time in five trading sessions. The strengthening follows support from the People’s Bank of China on Thursday.

Producer prices

The 11-month high in US producer prices may have added to worries the economy is still running hot, but did assuage some concerns about the prospect of runaway inflation, according to Quincy Krosby, chief global strategist for LPL Financial. 

“The PPI headline number came in a touch lower than estimates, helping markets ease fears of a broad based inflation assault on supply chain prices in addition to consumer prices,” she said.

Fed Bank of New York president John Williams said the central bank has made “tremendous progress” toward better balance on its inflation and employment goals, but added there’s no need to cut in the “very near term.” His Richmond counterpart Thomas Barkin said the US central bank still has work to do to contain price pressures and can take its time before cutting interest rates.