Market Perspective for April 28, 2017

On Monday, the Russell 2000 and Nasdaq hit new all-time highs following France’s preliminary election results. Earnings were also positive throughout the week as Internet and oil giants all beat forecasts. The Nasdaq gained 2.3 percent on the week to lead major indexes. The Dow Jones Industrial Average and S&P 500 gained 1.9 and 1.5 percent, respectively.

Google parent Alphabet (GOOG) reported earnings of $7.73 per share in the first quarter versus a $7.39 consensus estimate. Revenue also beat estimates. Shares of GOOG climbed 4 percent at the open on Friday, sending shares above $900 for the first time. Amazon (AMZN) also beat estimates by a wide margin, earning $1.48 per share versus a consensus forecast of $1.08 per share. Amazon rallied 3 percent at the open, pushing past $950 per share.

Caterpillar (CAT) exceeded estimates with an earnings beat of more than 100 percent, sending shares to a new all-time high that broke the stock out of its 6-year trading range. McDonald’s (MCD), DuPont (DD), Northrop Grumman (NOC), Comcast (CMCSA) and Bristol-Myers Squibb (BMY) all beat their earnings estimates by double digits.

Exxon’s (XOM) first quarter profit climbed 122 percent from 2016 and it beat estimates by 11 percent. Chevron (CVX) recovered from a loss in the year-ago quarter and beat estimates by 42 percent. General Motors (GM) also beat earnings estimates by double-digits with a 33 percent profit increase from 2016.

Healthcare stocks rose 2.3 percent this week, pulled higher by the medical device sector. Financials benefited from rising rate hike odds, while utilities saw muted gains. In technology, the Internet subsector rallied 4 percent and social media shares advanced 5 percent.

Eurozone inflation moved higher in April, beating expectations. Headline inflation climbed 1.9 percent year-on-year and core inflation rose 1.2 percent. France’s election lifted the Eurozone stock markets by an average of 5 percent this past week.
The Canadian dollar lost ground this week due to a worsening housing bubble. Home Capital, Canada’s largest subprime lender, required a bailout after depositors pulled their money from the bank. iShares MSCI Canada (EWC) fell just 1 percent on the week, but well behind the gains in Europe and the United States.

Although energy sector earnings were strong, oil prices lost the $50 level amid strong U.S. production. Long-term interest rates held steady during the week, with the 10-year Treasury yield at 2.3 percent. Short-term rates were clearer, with three-month Libor hitting 1.17 percent as the odds of a June rate hike hit 70 percent early in the week.

New homes sales spiked to an annualized pace of 621,000 in March, well above estimates of 580,000. Weekly jobless claims remained near record lows, and a small decline in March consumer confidence still left the Conference Board and University of Michigan surveys near 17-year highs.

First-quarter GDP growth met expectations at 0.7 percent. Home construction, nonresidential fixed investment, exports and personal consumption contributed to growth, while changes in inventory, government spending and rising imports detracted. The weak first quarter figure should spur Congress and the President to move more quickly on issues such as tax reform.

Employment costs climbed 0.8 percent, well above expectations of 0.6 percent. The GDP price index climbed 2.2 percent, also above expectations and within the Fed’s 2 to 3 percent inflation range.

ETF Investor Guide for April 2017

The April Issue of the ETF Investor Guide is NOW AVAILABLE!  Links to the April Data Files have been posted below. Market Perspective: Earnings Season Off to a Strong Start […]

Market Perspective for April 24, 2017

French stocks rallied 4 percent following the first round of voting and iShares MSCI France (EWQ) climbed more than 5 percent. Major U.S. indexes opened higher by 1 percent as well. Stocks also benefited from President Trump’s tax cut package, which he is expected to outline on Wednesday.
Rising odds of a June rate hike lifted Financials nearly 3 percent on Monday. The 10-year Treasury yield also briefly spiked back above 2.3 percent. The 2.3 percent level is the dividing line between near-term bull and bear market for interest rates.
Both the Conference Board and University of Michigan consumer confidence indexes will be out this week. Analysts forecast a slight decline from recent highs. New and pending home sales for March are also expected to pull back slightly from February’s pace, a consequence of winter storms in the Northeast and Midwest.
First quarter-GDP is due at 8:30 AM on Friday. The consensus forecast calls for 1.1 percent growth. Growth typically picks up in the second half of the year, and once the President and Congress outline their tax plans, business should accelerate.
The European Central Bank will meet on Thursday and is not expected to change policy. The Eurozone CPI is due on Friday and economists forecast an increase of 1.8 percent in headline CPI, along with a 1.0 percent rise in core CPI. The Bank of Japan will meet on Wednesday. Analysts do not foresee a policy change.
Earnings season is in full swing this week. Biotechnology, pharmaceuticals, chemicals, defense, technology, energy and consumer staples will be among the sectors most impacted.
Major companies reporting on Tuesday alone include AT&T (T), Coca-Cola (KO), Novartis (NVS), 3M (MMM), McDonald’s (MCD), Eli Lilly (LLY), Texas Instruments (TXN), Lockheed Martin (LMT), DuPont (DD), Biogen (BIIB), Caterpillar (CAT) and Capital One (COF).
Proctor & Gamble (PG), Pepsi (PEP), Amgen (AMGN), Boeing (BA), United Technologies (UTX) and General Dynamics (GD) and Northrop Grumman (NOC) are scheduled to report on Wednesday.
Thursday will be pivotal for the technology sector. Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN), Intel (INTC) will all report, in addition to Abbvie (ABBV), Celgene (CELG), Bristol-Myers Squibb (BMY), United Parcel Service (UPS), Starbucks (SBUX), Dow Chemical (DOW), Baidu (BIDU), Comcast (CMCSA), Ford (F), Raytheon (RTN), Deutsche Bank (DB), Southwest Airlines (LUV) and Vale (VALE).
The week will wrap up with oil giants Exxon (XOM) and Chevron (CVX) headlining, Colgate-Palmolive (CL), General Motors (GM) and Phillips 66 (PSX).

 

Market Perspective for April 21, 2017

The S&P 500 Index gained 0.80 percent this week and the Nasdaq climbed nearly 2 percent following positive industrial, financial, technology and healthcare sector earnings. The Dow Jones Industrial Average advanced 0.50 percent.

General Electric (GE) earnings and revenues beat expectations, despite declining revenue in its oil services division. GE expects to finalize a deal mid-year to combine its oil and gas division with Baker Hughes (BHI). Honeywell (HON) also beat earnings on slightly lower revenue. Shares subsequently rose 2 percent. Shares of oil service giant Schlumberger (SLB) fell 2 percent on Friday after the firm met analyst expectations. Overall, the report signaled a rise in North American oil drilling, however, the expense of restarting idle equipment lowered SLB’s margins.

Bank of America (BAC) shares bounced after the firm reported earnings of $0.41 per share, well above estimates of $0.35 per share, and 40 percent higher than year-ago earnings. The bank’sincome climbed more than $800 million in the first quarter. Other financial earnings were solid this week, with the exception of Goldman Sachs (GS), whose trading division caused lower-than-expected earnings.

Healthcare earnings were also very strong this week. Johnson & Johnson (JNJ), Abbot Labs (ABT) and UnitedHealth Group (UNH) all beat expectations. Strong reports from Abbot and UnitedHealth lifted healthcare provider and medical devices subsectors ahead of the broader healthcare sector.

Earnings beats by Netflix (NFLX), Qualcomm (QCOM) and chip equipment maker ASML Holdings (ASML) lifted the tech sector. Shares of eBay (EBAY) also beat estimates, but investors were looking for more and shares dipped on the week.

Economic data was largely positive this week. Housing starts in March missed expectations, but were 9 percent higher than last year. Housing permits were stronger, beating estimates and up 17 percent versus last year. March existing home sales also beat expectations, hitting the highest annualized sales pace since 2007.

The job market grew even stronger this week as continuing claims for unemployment hit their lowest level since 2000. Approximately 2 million people are collecting unemployment, down from the peak above 6 million during the past recession. If continuing claims drop, they will soon reach a four-decade low. Meanwhile, weekly initial claims for unemployment were 244,000.

Oil prices slipped during the week, falling back below $50 a barrel, weighing on the energy sector. The 10-year Treasury yield moved higher and finished the week at 2.2 percent. The U.S. Dollar Index was down slightly on the week.