Market Perspective for April 20, 2015

Stocks are headed higher this week thanks to intervention by the Chinese central bank. On Friday, following the close of trading in China, Chinese stocks were down as much as 7 percent in the futures market. The drop was a reaction to new rules restricting the use of leverage and making it easier to short stocks. On Saturday, the securities regulators issued a public statement saying their goal wasn’t to burst the stock market rally. On Sunday, the central bank followed up by slashing reserve requirements by 1 percent, a move that could release about $160 billion into the Chinese economy. The Chinese central bank is also discussing what would effectively be a Chinese quantitative easing plan following slower than expected economic growth in the first quarter.

In Europe, Greece is back in the headlines with a new deadline of May 11. It doesn’t pay to watch the news about Greece though, since there will be a new deadline every few weeks or months depending on how much aid the country receives in the short-term. Greece cannot repay its existing debts and until creditors allow them to restructure or they default, there will not be a solution. Instead of watching the news, keep an eye on the euro. It is trading above its lows for the year and as long as it doesn’t significantly break down again, the situation in Greece is more smoke than fire.

Earnings season kicks into high gear this week. Morgan Stanley (MS) already picked up where the big banks left off last week: the firm beat earnings estimates and shares were climbing in early trading on Monday. Energy services firm Halliburton (HAL) followed Schlumberger’s (SLB) lead from Friday as well: it reported a drop in earnings compared with last year, but earnings came in well ahead of estimates.

After the bell on Monday, International Business Machines (IBM) reports earnings.

Tuesday sees biotech giant Amgen (AMGN), widely held Chipotle (CMG), regional banks Fifth Third (FITB) and Regions Financial (RF) report. Additionally Harley-Davidson (HOG), Illinois Tool Works (ITW), homebuilder NVR (NVR), Verizon (VZ), Yum Brands (YUM) and Yahoo (YHOO) will be releasing earnings.

On Wednesday, Abbot Labs (ABT), AT&T (T), AutoNation (AN), Boeing (BA), DR Horton (DHI), eBay (EBAY), Las Vegas Sands (LVS), McDonald’s (MCD), SunPower (SPWR) and Coca-Cola (KO) deliver earnings reports.

Thursday has 3M (MMM), AbbVie (ABBV), Amazon (AMZN), BB&T (BBT), Caterpillar (CAT), Dow Chemcial (DOW), Domino’s Pizza (DPZ), Dunkin Brands (DNKN), Freeport-McMoRan (FCX), Juniper Networks (JNPR), Microsoft (MSFT) and Starbucks (SBUX) reporting.

On Friday, we get results from American Airlines (AAL), Biogen (BIIB) and Xerox (XRX).

Earnings will have the spotlight over the coming days, while there will be very little in the way of economic data. The two biggest items will be the Markit flash PMI for April on Thursday, flash PMIs for the EU and China and the durable goods orders from March on Friday.

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