Good morning!

Earnings season is here, and a top UBS economist said upbeat results could keep the stock market from succumbing to a hawkish Fed.

Today we’re also covering big bank stocks, money managers’ new regulatory headache, and Sam Bankman-Fried’s court appeal.

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*At a glance:

• DJIA: 38,765.00, up 0.09%

• S&P 500: 5,245.75, up 0.04%

• Nasdaq Composite: 18,492.50, up 0.04%

• 10-year Treasury yield: 4.564%, down 1 basis point

• Gold: $2,406.90 per ounce, up 1.44%

• Bitcoin: $70,706.05, up 1.43%

• Brent crude: $90.50 a barrel, up 0.85%

*Pre-market data and moves as of 12:00 a.m. ET

Markets face a ‘first-world problem’

Wall Street has pushed back its forecasts for interest rate cuts from the Federal Reserve.

The question now is whether stocks can continue their hot streak if rates stay higher for longer, or if the Fed takes cuts off the table entirely.

But to Brian Rose, a senior economist at UBS Global Wealth Management, central bank policy might actually be the wrong thing to focus on.

Before we get into it, here’s a recap of the last two days:

• March CPI came in hotter-than-expected Wednesday morning

• Stocks tumbled in Wednesday trading

• March PPI came in cooler-than-expected Thursday, at 0.2% for the month

• Stocks rallied in Thursday trading

I don’t think that a softer producer price reading is what rescued markets from the sizzling print the day before.

The former on its own isn’t enough to make the Fed cut or not, and swings are normal in markets.

According to Rose, stocks may ultimately keep marching higher largely because of earnings.

He told me delaying rate cuts isn’t that big of a deal because of certain pockets of strength in the economy, as well as the upbeat expectations for earnings.

“This is kind of a first-world problem,” Rose said on a call last night. “The economy is strong and there are positive implications for earnings.”

In simple terms, professional and retail investors buy stocks because they believe the prices will rise.

And when earnings come in better than expected, which is most of the time, stocks go up.

Sam Ro, who writes the financial newsletter TKer, highlighted in a Thursday note that in every quarter since 2006, no less than 60% of companies have reported earnings per share that beat analysts’ expectations.

To Rose’s point, while stocks have rallied to start the year thanks to optimism for rate cuts, it may take a material change in earnings to derail the momentum, rather than policy reasons.

“Basically rate cuts can help to boost market valuations,” Rose said. “But as long as earnings stay strong, the market won’t be in much trouble.”

One more detail: Wells Fargo, JPMorgan, and Citigroup report earnings today.

Despite our discussion above, it is possible a lackluster showing for banks drags on stocks across the board.

Financial names have had a strong start to the year, but they are uniquely vulnerable to high interest rates.

Some analysts say the downside will be reserved for regional banks, while the Wall Street behemoths carry on without a hitch.

Today’s earnings will shed light on how these firms have been faring in a high-rate environment.

Keep an eye out for pain points across investment banking and fluctuations in net interest income, as well as red flags for assets like commercial real estate.

Bank of America, Goldman Sachs, and Morgan Stanley report next week.

Elsewhere:

• Morgan Stanley stock plunged 5% Thursday. Regulators are investigating how the bank vets its wealthiest clients. It reports earnings on Tuesday. (WSJ)

• Money managers are set to shut down or convert $220 billion of US money market funds rather than pay for new upgrades required by regulators. The SEC’s new rules will come into effect in October. (FT)

• FTX founder Sam Bankman-Fried, the fallen crypto king who was sentenced to 25 years in prison, plans to appeal his sentence. A jury found him guilty on all seven counts he faced last year. (WSJ)

Rapid-fire headlines:

• Bond traders aren’t all biting at multi-year highs for yields (Bloomberg)

• Apple stock rallied to its best day in nearly a year (CNBC)

• Shares of Amazon hit a record in Thursday trading (Bloomberg)

• JPMorgan says Apple stock still has 25% upside (Business Insider)

• High auto insurance costs are keeping inflation elevated (CNBC)

• Mortgage rates on the most popular home loan ticked above 7% (CNET)

Last thing:

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