Market Matters…
|
Market/Index |
Year Close (2013) |
Qtr Close (03/31/14) |
Previous Week (04/11/14) |
Current Week (04/18/14) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
16,576.66 |
16,457.66 |
16,026.75 |
16,408.54 |
-1.01% |
-1.05% |
|
NASDAQ |
4,176.59 |
4,198.99 |
3,999.73 |
4,095.52 |
-1.94% |
-2.03% |
|
S&P 500 |
1,848.36 |
1,872.34 |
1,815.69 |
1,864.85 |
0.89% |
0.91% |
|
Russell 2000 |
1,163.64 |
1,173.04 |
1,111.44 |
1,137.90 |
-2.21% |
-2.32% |
|
Global Dow |
2,483.62 |
2,504.05 |
2,470.01 |
2,503.46 |
0.80% |
0.80% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
3.04% |
2.72% |
2.62% |
2.72% |
-32 bps |
10 bps |
What a difference a week makes. Just when the sky seemed to be falling over a projected poor earnings season, a weaker China, and continued disturbances abroad, investors took a new look and decided all was not bad in the world after all. After the Nasdaq fell close to a five-month low, investors reevaluated the economic situation and went bargain hunting for much of the week. Stocks rallied on decent earnings reports; signs that the devastating winter was starting to thaw out; and reports that China’s growth was slowing and its leaders may be considering stimulus measures. Many departed early for the holiday weekend, but seemingly left in a better mood that they started the week.
Earnings were mixed at best, but some investors viewed the overall news positively given the low expectations for the season. After JP Morgan-Chase offered bad news for financials last week, Citigroup surprised analysts with a favorable earnings report and both Goldman Sachs and Morgan Stanley bested expectations. Though Bank of America swung to a quarterly loss, much of the negativity stemmed from litigation expenses as opposed to operational results. Industry leaders Johnson & Johnson and Coca Cola also bested expectations and the former issued an upbeat outlook for the full year. Intel continued to reap ill-effects of the shrinking PC market, though again, its results were better than anticipated. IBM struggled with declining hardware sales though management continues to take a long-term view of its changing biz model to more cloud technology. Google posted a quarterly profit increase, though the much watched “paid click advertising” revenue continued to falter and many investors ran for the hills.
The Internet search giant did announce an acquisition during the week as it beat out Facebook in its pursuit of advanced aerial technology with the purchase of drone-maker Titan Aerospace. After a difficult few weeks, Twitter got a shot in the arm as certain early-stage investors publically announced that they are not planning to sell shares when their lockout period ends. After rising some 145% after IPO last year, Twitter has been one of the disappointing high-flyers as its stock had declined close to 40% before this boost of confidence.
Early in the week, Goldman Sachs attempted to put an end to the panic selling by issuing a report that said stocks still had “room to rise” and predicted S&P 1900, a modest gain by the end of the year. Investors overlooked the never-ending turmoil in Ukraine/Russia and newfound concerns in Libya and instead focused on some favorable Blue Chips earnings reports, decent economic releases, and hopes for economic stimulus measures in China. Even the Fed seemed to confirm that the winter season was finally in the rearview mirror and the economic picture (sans housing) looked reasonably favorable moving forward. Oil traders were not able to overlook the global disruptions, however, and crude prices hit a six-week high before the gov reported the largest one-week rise in supplies. After a pretty volatile few weeks, a long holiday weekend could be just what the doc ordered. Economic Calendar
|
Date |
Release |
Comments |
|
April 14 |
Retail Sales (03/14) |
Best showing since September 2012 |
|
April 15 |
CPI (03/14) |
Advanced slightly more than in February |
|
April 16 |
Housing Starts (03/14) |
Growth was well below forecasts |
|
|
Industrial Production (03/14) |
Climbed more than expected |
|
|
Fed Beige Book |
Economy rebounded from weather-related slowdowns |
|
April 17 |
Jobless Claims (04/12/14) |
Rose slightly but remained near a seven-year low |
|
The Week Ahead |
|
|
|
April 21 |
Leading Economic Indicators (03/14) |
|
|
April 22 |
Existing Home Sales (03/14) |
|
|
April 23 |
New Home Sales (03/14) |
|
|
April 24 |
Jobless Claims (04/19/14) |
|
|
|
Durable Goods Orders (03/14) |
|
China continued to top the headlines as it GDP growth plunged to 7.4%, a number that would be the envy of the rest of the world, but one that still represented the country’s worst showing in 18 months. Despite the latest setback, analysts viewed the report as a precursor for additional stimulus as Beijing has repeatedly stated that it would incorporate new measures if growth fell below acceptable rates. Across the pond, European Central Bank Prez Draghi also speculated that his policymakers are focusing on the value of the euro and stand prepared to engage in additional easing should the situation warrant.
At a time when the rest of the world is preparing to stimulate their respective economies, the Fed continues on its path of reducing the bond buying program. This week’s Beige Book showed an economy generally expanding at a “modest to moderate” pace as the country moves forward in a positive direction after the sluggish winter season. Manufacturing has been on the rebound; the consumer is becoming more active. The data du jour confirmed the Fed’s report as retail sales increased 1.1% last month, its best showing since September 2012. Manufacturing and labor picked up steam as industrial production rose well above forecasts in March and the latest jobless claims release remained near a seven-year low. On the negative side, housing starts fell last month as the warmer temperature has yet to promote construction activity, and building permits, a predictor of future activity, fell well below expectations.
Shifting to inflation, consumer prices jumped at a more acceptable pace, a development that typically would prompt some concerns, but one that was well-received as Chair Yellen and the Fed continue to worry about threats of deflation. During the week, Yellen reiterated her belief that low prices remain a major concern. She also made another case for continued low rates for the foreseeable future by stating that the labor market still has a ways to go, despite the low jobless rate and recent signs of enhanced payroll additions.
On the Horizon…Investors return to work well-rested (hopefully) and eager to find new value in the markets (hopefully). Earnings season plugs along with bellwethers UPS and Caterpillar offering signs about the overall economy and Apple and Microsoft providing another glimpse into the also interesting world of technology. Gilead Science is one of those high-flying bio-techs that prompted the recent sell-off so some favorable news on its earnings front could help stabilize that sector and the overall markets. The Fed is always an interesting topic, but its counterparts in Europe and China may offer even greater theater as investors hope for signs that new stimulus will right the courses of their respective economies. While many investors have seemingly overlooked Ukraine/Russia and even Libya, global events clearly impact the rest of the world so they always keep some watchful eyes on newfound developments. Yes, it is a small world after all.
