The S&P 500 Index performed relatively well in light of missed earnings and central bank disappointments. Apple’s earnings report sent shares down more than 10 percent on the week. Apple is the largest holding in the S&P 500 (3 percent of assets), and accounted for approximately a fifth of the index’s losses. It had a far larger impact on the Nasdaq, where it represents nearly 8 percent of assets.
As expected, the Federal Reserve did not change interest rates. The Fed’s policy statement indicated a slow first quarter, but removed language referring to global risks. The Bank of Japan did not change interest rates or expand asset purchases as the market had expected and priced in. The yen climbed to a new 18-month high versus the U.S. dollar and Japanese stocks erased all their gains for the week following the BOJ meeting.
The Bureau of Economic Analysis estimates a 0.5-percent increase in first quarter GDP, in line with final economist estimates as well as the Atlanta Fed’s model. Pending home sales were much stronger than expected, despite slightly low new home sales, a net positive for the housing market. Weekly jobless claims were below estimates, the trade deficit narrowed and durable goods orders rose. Personal income was also up 0.4 percent in March, though consumer spending lagged, spurring personal savings to a 3-year high. Second quarter GDP is expected to improve; the Atlanta Fed’s current model predicts 1.8 percent growth.
The United Kingdom’s GDP rose 2.1 percent. German consumer confidence surged 9.7 percent, beating consensus estimates. Eurozone business confidence remains upbeat under continued European Central Bank (ECB) monetary stimulus.
Boeing (BA) missed earnings expectations but provided strong future guidance based on anticipated robust aircraft sales. The markets were buoyed by earnings reports from Ford (F), Facebook (FB) and Amazon (AMZN). Ford nearly doubled its expected EPS, breaking a first quarter record. Shares of Facebook rose more than 8 percent as the company handily beat consensus earnings estimates on Wednesday. The company announced a new class of shares that would create a stronger financial structure going forward.
Amazon reported its fourth consecutive quarterly profit after Thursday’s bell, crushing expectations. Revenues climbed 28 percent and profits were 84 percent above estimates. The share price rose more than 12 percent after-hours and held most of the gains on Friday. The company’s cloud storage business unit proved impressive, delivering sales that were double those of the year-ago period.
Financials outperformed the S&P 500 throughout the week. Utilities and consumer staples rallied as investors gravitated toward higher yields amid reduced rate hike expectations. SPDR S&P Dividend (SDY) also outperformed the S&P 500. Industrials pulled back late in the week following a new all-time high on Wednesday. Four of the ten S&P 500 sectors have hit a new high this year.