The first quarter Federal Reserve Senior Loan Officer Survey revealed tighter lending conditions, although I thought they would be even tighter. Of course, the banking scare began toward the end of the quarter, so there is a chance conditions have gotten more difficult for would-be borrowers. Here is the rub: demand has crashed as much as standards have tightened. 

The market initially pulled back on the news because it could have been worse, and then major indices rebounded to finish the session relatively unchanged.

The same trend held for commercial real estate, where standards tightened considerably as demand plunged.  

Market Reaction

Yesterday, only three of the eleven S&P 500 sectors finished higher.

It was also the lowest volume session since Black Friday of last year.

Earnings Season

Earnings continue to impress, with 78% now beating the Street. This justifies the buoyancy of the market even for those that argue the consensus has come down a lot.  Remember when those estimates were coming down (began a year ago), so was the stock market.

Curmudgeons want to have it both ways.

Portfolio Approach

We are fully vested in our Hotline Model Portfolio.

Today’s Session

The market is under pressure as investors brace for tomorrow and the next wave of economic data starting with the Consumer Price Index in the morning.

NFIB Survey

The last couple of data points show inflation ebbing and recession risk rising, but there hasn’t been the kind of jarring news we know will begin soon.  Credit conditions held for small businesses, but the long term trend is lower.

Moreover, the optimism index is tilting even more toward a hard landing.

All eyes are back on regional banks this morning.

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