How Q1 earnings have driven markets

Robust earnings have been a driving force behind the market's gains. First quarter earnings contributed to a 5.4% year-over-year growth for the S&P 500 (^GSPC), according to FactSet. To provide insights into the market's momentum as earnings season continues, NYSE Senior Market Strategist Michael Reinking joins Catalysts.

As markets brace for a combination of inflation reports and earnings releases, Reinking notes that this week is also an options expiration week, a dynamic that could potentially heighten volatility. However, he points out that "positioning is more normalized" these days. Notably, with economic data and earnings pointing to growth, Reinking suggests there are "asymmetric risks to the upside from a market perspective."

"I think markets want to see that moderation, because...that's kind of that precursor to seeing that disinflationary process start to play out," Reinking tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video transcript

Well, stocks are climbing higher this morning continuing to recover here from what had been a downbeat April S and P 500 up over 3% so far this month on strong corporate earnings that is helped really drive the recent gains that we have seen that.

The index of 5.4% and year over year for earnings growth so far this quarter, the highest growth rate that we have seen since the second quarter of 2022.

This is according to leaves that out here from Factset.

So can this momentum continue as big buck retailers report this week?

We wanna bring in Michael Ryan King.

He is an NYS.

He's a senior market strategist, Michael.

It's great to have you here in studio with me.

So talk to me just about the set up here for this week because we have a couple of uh critical earnings reports that are out on deck.

When you talk about Home Depot and Walmart, you've also got uh the CP I print.

So what does this set up look like?

And some of the trading action that we did?

So, I mean, thank you very much for having me here in studio.

Yeah.

And it is a pretty interesting week.

Right.

So we do have an options, expiration week as well, right.

If you think back to where we were coming into last options exploration, we were starting to see kind of volatility, start to pick up.

Right.

That kicked off a little bit of a deleveraging that happened kind of throughout the marketplace and this time around like we have positioning that's, that's, you know, more normalized and, and, and right, we're not really stretched in, in either direction, particularly.

Uh and we have obviously, as you, as you pointed out some really key economic data, you know, both from the growth perspective and, and the inflation side of things, right?

And so looking at that inflation side, right, where the fed kind of set up, uh you know, just a couple of weeks ago where they said we're really squarely in this wait and see uh you know, kind of sort of moment, right?

That does seem to, to me suggest that you have, you know, a little bit more uh asymmetric risk to the upside from a market perspective if we were to get a little bit better than expected, um you know, kind of inflation report because the the um they they raised the bar so high for potential rate hikes, right, as you just mentioned, right, that's kind of come off the table now, right?

So that, you know, it does seem like we're, we're a little bit skewed to the upside and then we're watching the retail sales for the growth side of the equation.

What do you expect to see there?

We're going to see in a moderate, I, I would expect to see, you know, kind of a moderation, you know, kind of on that side of things as well.

And I think markets and investors are, are gonna, will actually kind of applaud that, right?

Because we've seen in past months where when you've gotten those really hot retail sales numbers, right?

That suggests that the economy is starting to potentially re accelerate.

I think markets are, are, you know, want to see that moderation because that will, then that's kind of the precursor to seeing that this inflationary process start to play out, right?

And then as you start to listen to kind of those conference calls, you're gonna want to hear, you know, that, that we're not seeing that necessarily a spread of, of kind of pain, um you know, kind of across the wage scale, right?

So that it's still, you know, kind of staying in the lower income and it's not necessarily spreading higher.

And then, you know, even the retailers are gonna give us some pretty good and, you know, in um insight into kind of the inflationary backdrop, right?

And just listening to commentary from kind of Walmart and hearing how they see, you know, kind of prices starting to, to move throughout the remainder of this year.

And they suggested in their last quarter, right, that they, they saw some disinflationary pressure.