Markets rallied out of the gate as earnings season officially launches tomorrow with several big banks reporting Q1 results. At the close the Dow gained 293 points to close at 24,283 on mixed trading volume. Both IBD and BTS indicators have suddenly gone positive. IBD says the market rally is back on track and BTS indicated that they have moved out of cash into high yield bonds which are correlated to stocks. Banks were market leaders today and earnings expectations are running high.
The BTS conference call today was interesting. After a lengthy discussion on inflation, interest rates, bond market conditions and such, the bottom line to BTS is that they do not see a recession occurring until late 2019 or 2020. BTS reminds us that this is a projection and to realize that geopolitical risk from a number of sources could spark a market pullback and or an economic slowdown. For the time being however the good folks at BTS figure that good fundamentals should last for at least a year or longer.
Inflation rates in the energy sector are moving up more than the economy as a whole. Within the oil patch inflation is now at 8% and this will be felt in two different ways. One will be rising margins and stronger earnings for energy companies and the other will be higher costs for airlines, truckers and a lightening of the wallets of motorists going forward. WTI oil was up again today closing at $67.21 per barrel. Natural gas meanwhile has yet to move up and currently trades near a 12 month low of $2.68 per million BTUs.