Markets Enter the Danger Zone

Earnings Are About to Put Us in Overdrive

Wall Street didn’t just hit turbulence—it’s flying blind into a storm. With yesterday’s hot inflation print (HERE), today’s PPI collapse, and a wave of bank earnings flashing red across the dashboard, markets have officially left cruising altitude. We’re now descending fast on the Highway to the Danger Zone—and this time, Kenny Loggins isn’t just background music.

“The further on the edge, the hotter the intensity… Highway to the Danger Zone… Gonna take it right into the Danger Zone.”

— Kenny Loggins, Top Gun (1986)

Just like Maverick pushing past the safety limits, the U.S. economy is ripping through rising interest rates, collapsing demand, and technical breakdowns with no clear runway ahead. This earnings season, “Danger Zone” might as well be the official anthem of the S&P 500.

The PPI just rolled over, flashing early signs of deflation. The Nasdaq is printing a death cross, confirming a bearish trend. And under the hood, big banks are juicing their earnings with tactics right out of Financial Shenanigans—delaying expenses, leaning on volatile revenue, and burying red flags in “other income.”

This isn’t a drill. It’s afterburners off, warning lights flashing, and no room for error. If this were a flight simulation, we’d already be reaching for the eject handle.

PPI Miss = A Demand Collapse in Disguise

The March PPI report showed a -0.4% drop in wholesale prices, with 70% of the decline in final demand goods, which fell -0.9%—a monthly move. Even services ticked down -0.2%. On a 12-month basis, final demand goods are up only 1.0%—a signal of fizzling pricing power and weakening demand.

Translation: Too much inventory, not enough buyers. Sellers will have to slash prices to clear the shelves. This is a classic recessionary setup—falling upstream prices often lead consumer inflation lower, but also signal economic deceleration. And in the current environment, slowing demand + high rates = stall speed.

Bank Earnings Enter the Danger Zone

“Beats” on Paper—But Redline Warnings Are Everywhere

Earnings season just kicked off, and while JPMorgan, Morgan Stanley, and Wells Fargo reported headline “beats,” a deeper look reveals something else entirely: afterburners failing, margin compression rising, and structural cracks hidden behind the smoke of accounting gimmicks. In the language of Top Gun, these banks aren’t cruising—they’ve pushed into overdrive, and they’re now flying straight into the Danger Zone.

JPMorgan: Core Profitability Falling Into a Stall

JP Morgan’s net interest income (NII) dropped -$826 million YoY—an unexpected result in a rising-rate environment where banks are SUPPOSED to thrive.

• Higher rates should boost NII, but instead JPM is experiencing margin compression, driven by rising deposit costs and sluggish loan growth.

• Internal Funds Transfer Pricing (FTP) changes signal that consumer deposits are becoming costlier, as customers demand better yields.