Monthly Archives: April 2015

Market Insights 4/30/2015

Equities Suffer Sharp Session Losses

The U.S. equity markets closed the trading session decisively to the downside as the Street reacted to some mixed corporate earnings reports and divergent data from the economic front. Treasuries were mostly unchanged and crude oil prices were mixed, while the U.S. dollar and gold traded lower.

The Markets…

The Dow Jones Industrial Average dropped 195 points (1.1%) to 17,841

The S&P 500 Index fell 21 points (1.0%) to 2,106

The Nasdaq Composite tumbled 82 points (1.6%) to 4,941

In moderately heavy volume, 1.1 billion shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude rose $1.05 to $59.63 per barrel, wholesale gasoline was $0.04 higher at $2.05 per gallon

The Bloomberg gold spot price declined $21.07 to $1,183.64 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 94.79

Jobless Claims Fall, Personal Income & Spending Miss

Weekly initial jobless claims dropped by 34,000 to 262,000 last week, well below the 290,000 Bloomberg estimate, as the prior week’s figure was upwardly revised by 1,000 to 296,000. The four-week moving average declined by 1,250 to 283,750, while continuing claims fell 74,000 to 2,253,000, south of the forecasted 2,300,000 level.

Personal income was flat month-over-month in March, versus the forecasted 0.2% gain, while February’s 0.4% rise was un-revised. Personal spending rose 0.4% m/m in March, versus expectations of a 0.5% increase, while February’s 0.1% gain was adjusted to a 0.2% advance. The March savings rate as a percentage of disposable income declined to 5.3% from the downwardly revised 5.7% posted in February. Meanwhile, the PCE Deflator was up 0.2% m/m, matching forecasts, while the prior month’s 0.2% gain was unadjusted. Compared to last year, the deflator was 0.3% higher, below expectations of a 0.4% increase. Excluding food and energy, the PCE Core Index was higher by 0.1%, below forecasts of a 0.2% rise, and the index was 1.3% higher y/y, compared to expectations of a 1.4% gain.

The Chicago Purchasing Managers Index showed growth in Midwest activity snapped a string of two-months of contraction, moving back to a level denoting expansion (above 50) with a rise to 52.3 in April from 46.3 in March, and versus expectations of an improvement to 50.0.

Treasuries were nearly unchanged, with the yield on the 2-year note gaining 1 basis point to 0.57%, while the yields on the 10-year note and the 30-year bond were flat at 2.04% and 2.75%, respectively. Treasury yields have rallied, with bond prices dropping, as of late despite pushed out expectations of a rate hike by the Federal Reserve, which yesterday kept its monetary policy unchanged and removed any date reference as to when a rate liftoff could occur in its statement.

With the Fed noting that soft 1Q economic data reflected “transitory factors,” tomorrow the U.S. economic calendar will bring some fresh data regarding business activity to begin 2Q. The ISM Manufacturing Index is forecasted to show growth accelerated slightly to 52.0 in April from 51.5 in March, while Markit will report its final Manufacturing PMI Index for this month, expected to remain at the preliminary reading of 54.2, but down from the 55.7 level posted in March. Other April reports include: domestic vehicle sales and the University of Michigan Consumer Sentiment Index, with both expected to show modest improvements, while March construction spending will round out the day. U.S. stocks have moved into positive territory for the year, despite continued soft economic data and a relatively weak earnings season so far. Investor skepticism seems to be helping support equities in a contrarian sense; although grinding rather than racing appears to be the current track.

Europe Moves Higher After Yesterday’s Drop

The European equity markets clawed back to finish mostly higher following yesterday’s broad-based drop that came courtesy of a sharp rise in government bond yields in the region. Bond yields have jumped as of late on bearish commentary toward the sector, signs of a relative warming of inflation, and as German debt auctions have seen lackluster demand.

Traders reacted to yesterday’s unchanged Fed monetary policy stance in the U.S., while showing some relative resiliency amid some disappointing earnings reports. Greek stocks rose solidly despite lingering debt deal uncertainty. Encouraging media reports bolstered optimism as they suggested Greece and its Eurozone counterparts are increasing negotiations to try to strike a deal by early next month, when the nation has some key debt payments coming due.

Oil & gas stocks clung to gains as oil prices extended their recent rally. In economic news, Eurozone April core consumer price inflation rose at a pace that matched expectations and Spain’s 1Q GDP growth topped forecasts, while German retail sales unexpectedly fell in March and the nation’s unemployment declined by a smaller amount than expected for April.

Asia Mostly Lower

Stocks in Asia finished lower ahead of tomorrow’s holidays in the region that will have several markets closed, while sentiment was dampened by yesterday’s disappointing U.S. 1Q GDP report and upside volatility in government bond yields for the U.S. and European markets. Also, traders reacted to yesterday’s unchanged monetary policy stance by the U.S. Fed, while today’s Bank of Japan policy decision to keep its stimulus measures unchanged appeared to disappoint.

Japanese equities were lower despite a much smaller-than-expected decline in the nation’s March industrial production. Chinese stocks also moved to the downside amid lingering concerns about the crackdown on margin trading and some caution ahead of tonight’s release of the country’s manufacturing output, which will come as the markets in the nation will be closed. Australian stocks declined amid a lack of conviction ahead of next week’s banking sector earnings reports, while sentiment remained dampened by the volatility in the Australian dollar as expectations of further rate hikes waned.

Market Insights 4/29/2015

Fed Stays Put, but GDP Miss Hits Stocks

U.S. equities finished lower after the Federal Reserve’s monetary policy statement offered no surprises and a read on domestic 1Q GDP growth was well short of forecasts. Earnings releases remained front and center on the equity front, with mixed results.

Treasuries finished lower, with housing data the other items on the economic calendar showing a rise in pending home sales and a decline in mortgage applications, while gold prices and the U.S. dollar were lower, and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average fell 75 points (0.4%) to 18,035

The S&P 500 Index lost 8 points (0.4%) to 2,107

The Nasdaq Composite declined 32 points (0.6%) to 5,024

In moderate volume, 857 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude rose $1.52 to $58.58 per barrel, wholesale gasoline was $0.01 higher at $2.01 per gallon

The Bloomberg gold spot price declined $7.61 to $1,204.56 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.9% lower at 95.23

Fed statement offers no major surprises, 1Q GDP misses

As was widely expected, the Federal Open Market Committee (FOMC) held steady on monetary policy, but the Committee did remove any date reference as to when any rate hike could occur in its statement. Its assessment of economic growth changed somewhat to indicate that since the March meeting “economic growth slowed during the winter months, reflecting transitory factors.” However, the Committee agreed that “with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.” T

The first look (of three) at 1Q Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of expansion of 0.2%, from the 2.2% expansion in 4Q, and below the 1.0% growth forecasted by Bloomberg. Personal consumption came in north of forecasts, rising 1.9%, following the 4.4% increase recorded in 4Q, and versus the 1.7% gain that was projected. 1Q GDP growth decelerated as downshifts in personal consumption and residential fixed investment were accompanied by downturns in exports, nonresidential fixed investment, along with state and local government spending. These were partly offset by a deceleration in imports and upturns in private inventory investment and federal government spending.

On inflation, the GDP Price Index came in cooler than expected at a 0.1% decrease from the 0.1% advance seen in 4Q, and compared to the 0.5% increase that was anticipated, while the core PCE Index, which excludes food and energy, rose 0.9%, south of expectations calling for a 1.0% increase, and following the 1.1% growth in 4Q.

Pending home sales rose 1.1% month-over-month in March, versus the projected 1.0% gain, and following the upwardly revised 3.6% increase registered in February. Compared to last year, sales were 13.4% higher last month, versus the 5.1% rise that was anticipated. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which jumped in March.

The MBA Mortgage Application Index declined 2.3% last week, after rising by the same amount in the previous week. The decrease came as a 3.7% drop in the Refinance Index was accompanied by a flat reading for the Purchase Index, with the average 30-year mortgage rate rising 2 basis points to 3.85%.

Treasuries finished lower, with the yield on the 2-year note nearly unchanged at 0.56%, while the yield on the 10-year note rose 4 bps to 2.05%, and the 30-year bond rate gained 5 bps to 2.76%.

Tomorrow’s economic calendar will be fairly busy and include: the 1Q Employment Cost Index, forecsted to have risen 0.6%, matching that seen in the 4Q; personal income and spending, with economists expecting 0.2% and 0.5% m/m increases, respectively; weekly initial jobless claims, anticipated to have moved lower to a level of 290,000 from the 295,000 posted the week prior, and the Chicago Purchasing Managers Index, forecast to indicate a level of 50.0 for April from the 46.3 registered in March, with 50 being the demarcation point between expansion and contraction.

European and Asian stocks lower amid Fed caution

The European equity markets traded lower, with traders digesting some mixed earnings reports on both sides of the pond, along with the disappointing 1Q U.S. GDP report, while caution appeared to be elevated before today’s Fed monetary policy decision in the U.S. Basic materials stocks led to the downside, while government bond yields in the region rallied to exacerbate sentiment on bearish commentary toward the sector, signs of a relative warming of inflation, and as demand in a German debt auction disappointed. In economic news, German consumer price inflation dipped in April, while eurozone consumer, economic and business confidence reports all missed expectations for this month.

The U.K. FTSE 100 Index was down 1.2%, France’s CAC-40 Index dropped 2.6%, Germany’s DAX Index fell 3.2%, Spain’s IBEX 35 Index decreased 2.0%, Italy’s FTSE MIB Index declined 2.3%, Switzerland’s Swiss Market Index traded 1.7% lower, and Greece’s ASE Athens Index descended 1.0%.

Asian stocks also finished mostly lower amid some concern about earnings in China and as traders likely treaded cautiously ahead of today’s monetary policy decision in the U.S. However, volume was lighter than usual, with Japanese markets closed for a holiday. Mainland Chinese stocks finished flat, while in Hong Kong markets declined amid news that the country’s largest brokerage firm restricted eligibility requirements for margin lending.

Text of Fed Statement on Interest Rates

The following is the text of the Federal Reserve’s decision on interest rates released Wednesday:

Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that under-utilization of labor resources was little changed. Growth in household spending declined; households’ real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

U.S. GDP grows a scant 0.2% in first quarter

The U.S. grew at a meager 0.2% annual pace in the first three months of 2015, a period marked by severe weather, a major port dispute and a soaring dollar that curbed American exports.

Consumer spending, the main engine of growth, slowed sharply to 1.9%, below the average 2.3% increase since the recovery began in mid-2009. Business investment in “structures” such as mining shafts and wells sank 23.1% in the first quarter, reflecting lower spending by U.S. energy companies seeking to cope with suddenly cheap oil.

Other companies also cut back on investment amid a surge in the dollar that’s made U.S. goods and services more expensive to sell outside the nation’s borders. Exports tumbled 7.2% while imports edged up 1.8%. A bigger trade deficit subtracts from GDP. Spending on new home construction, meanwhile, rose a scant 1.3% as severe weather hampered builders.

The value of inventories, which adds to GDP, increased by a surprisingly large $110.3 billion, the Commerce Department said. Inflation as measured by the PCE price index fell at a 2% annual pace, though the core rate that excludes food and energy rose at 0.9% clip.

Market Insights 4/28/2015

Bumpy Ride Ahead of Fed Decision

After spending time on either side of the flat-line in today’s session, U.S. equities finished mixed in the wake of a sundry of reports on the earnings and economic fronts, highlighted with tomorrow’s monetary policy decision from the Federal Reserve. Treasuries finished lower, as did the U.S. dollar, while gold and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average rose 72 points (0.4%) to 18,110

The S&P 500 Index gained 6 points (0.3%) to 2,115

The Nasdaq Composite declined 5 points (0.1%) to 5,055

In moderate volume, 787 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude inched $0.07 higher to $57.06 per barrel, wholesale gasoline was unchanged at $2.00 per gallon

The Bloomberg gold spot price rose $9.67 to $1,211.82 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 96.17

U.S. data mixed as Fed set to begin two-day policy meeting

The 20-city composite S&P/Case-Shiller Home Price Index showed a gain in home prices of 5.0% y/y in February, above the estimate of a 4.7% increase. M/M, home prices were up by 0.9% on a seasonally adjusted basis for February, north of forecasts calling for a 0.7% gain.

The Consumer Confidence Index fell to 95.2 in April from an upwardly revised 101.4 in March and compared to the Bloomberg estimate of 102.2. The disappointing figure came as both the components pertaining to expectations of business conditions and the present situation declined month-over-month. Also, on employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—deteriorated to -7.3 from -4.5 last month.

The Richmond Fed Manufacturing Activity Index showed activity in the Mid-Atlantic region remained in contraction territory, rising to -3 in April from -8 in March, versus expectations of an improvement to -2. A reading of zero is the demarcation point between expansion and contraction.

Treasuries finished lower, with yields moving higher, as the yield on the 2-year note increased 2 basis points to 0.56%, while the yield on the 10-year note rose 6 bps to 1.99%, and the 30-year bond rate rose 7 bps to 2.67%.

U.S. economic data to begin the year has disappointed due to headwinds including: reduced capital expenditures and production out of the energy sector due to the fall in crude oil prices, harsh winter weather, West Coast port disruptions, and the rally in the greenback. As such, economists have pushed out their rate-hike expectations by the Federal Reserve—which is set to deliver its monetary policy decision tomorrow—from June to September, per Bloomberg . Also, tomorrow’s first look at 1Q GDP is projected to show an annualized quarter-over-quarter expansion of 1.0%, the slowest pace in four quarters, and a deceleration from 4Q’s 2.2% pace of growth.

However, housing data has suggested the housing recovery may be on the rebound and leading indicators for housing point to the possibility that y/y growth in real residential investment—the housing component of gross domestic product (GDP)—could move into double-digit territory by the fourth quarter of this year; but we should probably temper those expectations given the reluctance to borrow, still-high home prices, and the possibility of higher mortgage rates. Nonetheless, housing is likely to be a brighter light illuminating the economy this year.

Europe lower, Asia mixed ahead of Fed meeting

The European equity markets paused from their recent rally, finishing mostly lower, led by healthcare stocks, which weighed on U.S. markets late-yesterday, exacerbated by Mylan NV’s rejection of Teva Pharmaceutical Industries Ltd’s $40 billion proposal to acquire the generic drug maker.

Traders may have used some caution ahead of tomorrow’s monetary policy decision by the Fed in the U.S., while Greek debt deal uncertainty remained. In economic news, preliminary U.K. 1Q GDP expanded at a 0.3% quarter-over-quarter pace, missing the 0.5% growth that was forecasted and compared to the 0.6% increase posted in 4Q.

Stocks in Asia finished mixed as traders digested earnings reports in the region, while caution may have reigned ahead of tomorrow’s monetary policy decision in the U.S. and Thursday’s conclusion of the Bank of Japan’s policy meeting. Japanese equities rose, as a disappointing March retail sales report was overshadowed by some upbeat earnings results.

Mainland Chinese stocks fell in the wake of the nation’s securities regulator warning about the risk of investment losses, per Bloomberg, and as earnings results were a bit disappointing, while Indian markets rebounded from recent weakness, finding support from some favorable earnings reports in the nation.

Market Insights 4/27/2015

Market Slow of Action

U.S. stocks gave up early gains to finish lower amid a sluggish day and mostly downbeat news out of both the equity and economic fronts, ahead of key reports and the Federal Reserve’s monetary policy meeting set for midweek.

Earnings took a back seat to M&A activity today, while manufacturing reports were uninspiring. Treasuries were modestly lower, while the U.S. dollar and crude oil prices were lower, and gold rallied.

The Markets….

The Dow Jones Industrial Average fell 42 points (0.2%) to 18,038

The S&P 500 Index lost 9 points (0.4%) to 2,109

Small and MidCaps trailed LargeCaps with the MidCap 400 down .78% and the SmallCap 600 off .73%

The Nasdaq Composite declined 32 points (0.6%) to 5,060

In moderate volume, 795 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude shed $0.16 to $56.99 per barrel, wholesale gasoline was $0.01 lower at $2.00 per gallon

The Bloomberg gold spot price rose $24.09 to $1,203.09 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 96.74

Services sector growth decelerates more than expected

The preliminary Markit U.S. Services PMI Index showed growth in the sector slowed more than expected, dropping to 57.8 in April from 59.2 in March, and compared to the Bloomberg forecast of a dip to 58.8, with a reading above 50 denoting expansion. Although the report missed forecasts, Markit noted that business activity and incoming new work both increased at “robust rates in April,” and payroll numbers posted the sharpest increase since June 2014. Cost inflation rose to a six-month high. The release is independent and differs from the Institute for Supply Management’s (ISM) non-Manufacturing Index, as it has less historic value and Markit weights its index components differently. Markit’s services sector gauge is the companion to its manufacturing index, which last week surprisingly declined for April to 54.2 from 55.7 in March.

The Dallas Fed Manufacturing Index showed the contraction in activity for the region was more severe than anticipated, improving to -16.0 for April from March’s -17.4 level but compared to the forecasted -12.0 figure. A reading below zero denotes contraction.

Treasuries finished lower, as the yield on the 2-year note rose 2 basis points to 0.52%, the yield on the 10-year note ticked 1 bp higher to 1.92%, while the 30-year bond was flat at 2.61%.

Tomorrow’s economic calendar will provide investors a look at the S&P/Case-Shiller Home Price Index, forecasted to show that home prices within the 20-city composite rose 4.7% year-over-year and 0.7% month-over-month on a seasonally-adjusted basis during February, and Consumer Confidence, with economists looking for a reading of 102.2 for April, up from the 101.3 posted in March.

Greek headlines and corporate reports help lift European stocks, Asia mixed

The European equity markets traded higher, with media reports suggesting Greece may be willing to make reform changes to help unlock further bailout aid—per Bloomberg—buoying sentiment. Also, the nation announced that it has reshuffled its team involved with bailout negotiations with its international creditors. Greece has been unsuccessfully meeting with its international creditors as it has some major debt payments coming due next month.

In economic news, German import price inflation rose much more than expected in March, while a read on U.K. business optimism unexpectedly fell for this month. Further east, stocks in Asia finished mixed to begin the week, with caution prevailing ahead of monetary policy meetings this week from the Fed and Bank of Japan (BoJ), while traders braced for earnings reports in the region. In economic news in the region, China’s industrial profits declined in March, preserving lingering optimism regarding further stimulus measures by the government to boost growth. Also, hopes of reform for state-owned-enterprises buoyed the equity markets in the region.

Are Weak Earnings Here to Stay?

Q1 Scorecard (as of April 24nd, 2015)

With results from more than one-third of the S&P 500 index’s total market capitalization already on the books, we have a representative enough sample in hand to evaluate the Q1 earnings season. The actual numbers will evolve over the coming days as more companies report results, but the overall theme emerging from the results thus far will likely carry through to the end.

This common theme pertains to broad-based top-line weakness. Not only are revenue growth rates very low, but an unusually large proportion of companies are missing consensus revenue estimates. We knew that growth rates would be challenged this earnings season following the unusually sharp cuts to estimates ahead of the reporting cycle, but the very low revenue beat ratios are nevertheless a standout element of this earnings season.

We now have Q1 results from 135 S&P 500 members that combined account for 35.2% of the index’s total market capitalization. Total earnings for these 135 companies are up +10.2% on +1.2% higher revenues, with 68.9% beating EPS estimates and only 31.9% coming ahead of top-line expectations. This is weak performance compared to what we have seen from the same group of 135 S&P 500 members in other recent periods.

Three things stand out as we look at the results thus far:

First, the revenue weakness is very notable. We knew that growth will be problematic in Q1, so the weak revenue growth rate of +1.2% compared to other recent periods isn’t that surprising. But the very low proportion of companies beating revenue estimates is surprising and likely indicative that the growth backdrop has been even weaker than what was reflected in consensus estimates.

Second, the earnings growth rate (+10.2%) compares favorably to what we saw from the same group of companies in 2014 Q4 and the 4-quarter average. But the favorable growth rate comparison is solely due to the Finance sector. Exclude Finance from the result and the growth comparison shifts in the other direction, as the right hand-side chart below shows.

Third, as has been the norm in recent quarters, management teams continue to guide lower for the current and following quarters. As a result, estimates for the current quarter, which had fallen quite a bit already in solidarity with the Q1 estimate cuts, have started coming down even more. The chart below shows how earnings growth estimates for Q2 have evolved since the beginning of the year.

Notably, the Finance sector has been a big growth contributor this earnings season, with total earnings for the sector up +21.3% on +1% higher revenues, with 53.1% of the sector companies beating EPS estimates and 40.6% beating revenue expectations.

The dollar issue has added to the Energy sector’s woes and some concerns about the U.S. economic picture in bringing down this year’s estimates. Current consensus estimates show earnings growth for the S&P 500 to be in the negative for the first three quarters of the year, with the growth rate for the full-year now modestly in the negative. The expectation is that the growth picture starts improving in the last quarter of the year, with the growth pace ramping up to double-digit rates in 2016.

Market Insights 4/24/2015

Records For Nasdaq

The domestic equity markets closed out a solid week with some measurable gains as the Nasdaq led the record breaking headlines for the first time this millennium. Treasuries were also higher as the release of the U.S. durable goods report showed declining demand for big-ticket items outside of aircraft and autos. Gold and the U.S. dollar were lower, while crude oil prices were mixed.

The Markets…

The Dow Jones Industrial Average gained 21 points (0.1%) to 18,080

The S&P 500 Index added 5 points (0.2%) to 2,118, sectors were mixed on the day with 5 up and 5 down. Winners included Consumer Discretionary, Utilities, Technology and Materials while Energy, Financials, HealthCare and Industrials all retreated into the red.

Small and MidCaps lagged the broader markets with the MidCap 400 giving back .41% and the SmallCap 600 shaving off .18% in moderate volume.

The Nasdaq Composite advanced 36 points (0.7%) to 5,092

In moderately heavy volume, 760 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude fell $0.59 to $57.15 per barrel, wholesale gasoline was $0.02 higher at $2.01 per gallon

The Bloomberg gold spot price declined $15.19 to $1,178.78 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 96.94

Markets were higher for the week, as the DJIA increased 1.4%, the S&P 500 Index advanced 1.8%, and the Nasdaq Composite Index rallied 3.3%

Core durable goods orders miss

Durable goods orders rose 4.0% month-over-month in March, compared to the Bloomberg estimate of a 0.6% increase, while February’s 1.4% drop was unrevised. However, ex-transportation, orders declined 0.2% m/m, versus the forecast of a 0.3% gain, and February’s 0.4% decrease was negatively revised to a 1.3% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, dropped 0.5%, compared to the projected 0.3% increase, and following the downwardly revised 2.2% fall in the month prior, from an initially reported decline of 1.4%.

The headline figure was supported by sharp gains in volatile components of aircraft and autos, while the disappointing underlying results came as orders for machinery and communications equipment fell. The report likely reflected the negative impact of the stronger U.S. dollar, which is weighing on overseas demand, and reduced capital spending out of the energy sector on the heels of the drop in crude oil prices. Also, the recent harsh winter weather and the disruption at West Coast ports likely exacerbated the disappointing report. However, technology-related orders were a bright spot in the report, with demand for computers and related products jumping 11.0% m/m.

Treasuries were higher, with the yield on the 2-year note declining 2 basis points to 0.51%, the yield on the 10-year note falling 5 bps to 1.91%, and the 30-year bond rate decreasing 4 bps to 2.61%.

Weekly Recap: Stocks rally as Nasdaq hits all-time high

The equity markets showed some resiliency this week as mixed economic data likely kept Fed rate hike concerns in check and 1Q earnings season showed bottom-line results were relatively positive but the strong U.S. dollar hamstrung topline growth. The Nasdaq led the way, finally breaching its March 2000 all-time high, as late-week earnings reports from the tech sector pleased the Street.

Sentiment was buoyed by more stimulus out of China in the form of a 100 bp cut to its banking sector reserve requirement ratio, along with further signs that the U.S. housing market may be improving, with existing home sales jumping to an eighteen-month high. As noted previously, the bears can’t seem to grab hold of this market, but that doesn’t mean full-speed ahead for the bulls either. Grinding generally higher with increased volatility seems to be the course for now, but the possibility of a correction still exists. We are clearly in a “plow horse” market and not a “race horse” market. The going is tough, muddy and uphill, but money can and is being made.

Next week: The Fed, 1Q GDP and manufacturing data set to host a heavy economic week

Next week, 1Q earnings season will continue to roll on, though the domestic economic calendar is poised to command attention, as Wednesday’s first look (of three) at 1Q GDP and afternoon monetary policy decision from the Federal Open Market Committee (FOMC) will be followed by Friday’s releases of the ISM Manufacturing Index and Markit’s final Manufacturing PMI Index. U.S. economic data has continued to be soft, potentially pushing out Fed rate hike expectations. We believe the Fed will likely raise rates this year with September making the most sense and logic.

Europe mostly higher amid some upbeat earnings reports, Asia mixed

The European equity markets traded mostly to the upside, as Greek stocks extend weekly gains despite growing pessimism that the nation will gain further access to bailout aid as the nation met with eurozone finance ministers today with little signs of progress. Earnings reports in the region lent support, while further boosting sentiment, German business confidence improved for a sixth-straight month to a ten-month high for April.

The U.K. FTSE 100 Index was up 0.2%, France’s CAC-40 Index rose 0.4%, Germany’s DAX Index and Spain’s IBEX 35 Index gained 0.7%, Italy’s FTSE MIB Index advanced 1.0%, and Greece’s ASE Athens Index rallied 3.4%, while Switzerland’s Swiss Market Index declined 0.4%.

Stocks in Asia finished mixed following the mixed earnings and economic data in the U.S. yesterday, while Greek debt deal uncertainty remained. Japan’s Nikkei 225 Index snapped a three-session winning streak, with a stronger yen weighing on the markets. Mainland Chinese stocks stepped back from fresh seven-year highs as moves by regulators to expedite initial public offerings (IPOs) dampened sentiment. Amid some mixed earnings reports, South Korean equities traded lower despite an improvement in the nation’s consumer confidence for April. However, Australian equities were supported by strength in the basic materials and oil & gas issues in the wake of recent rises for iron ore and crude oil prices.

Company Specific News

Amazon.com reported a 1Q loss of $0.12 per share, compared to the FactSet projection of a $0.14 shortfall, as revenues rose 15.0% year-over-year (y/y) to $22.7 billion, above the expected $22.4 billion. AMZN issued 2Q revenue guidance with a midpoint that was below estimates.

Microsoft Corp posted fiscal 3Q earnings-per-share of $0.61, north of the $0.51 expectation, with revenues growing 6.0% y/y to $21.7 billion, versus the $21.1 billion forecast.

Google Inc announced 1Q EPS ex-items of $6.57, below the $6.61 estimate, as revenues, excluding traffic acquisition costs (TAC), rose 14.2% y/y to $13.9 billion, compared to the expected $14.1 billion. Shares are gaining ground despite the results as the company’s operating margins came in better than expected, representing the first time in sixteen quarters that they have not contracted, per FactSet.

Starbucks Corp achieved fiscal 2Q profits of $0.33 per share, inline with expectations, as revenues rose 18.0% y/y to $4.6 billion, above the estimated $4.5 billion, with same-store sales growth of 7.0% topping the 5.1% rise that was anticipated. SBUX issued full-year EPS guidance with a midpoint missing projections, while it reaffirmed its revenue and same-store sales outlooks.

Comcast Corp announced that its $45.2 billion merger agreement with Time Warner Cable Inc. and its transactions agreement with Charter Communications Inc. have been terminated, due to regulatory push-back in the past couple days. Comcast said, “Today, we move on. Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn’t agree, we could walk away.” Time Warner Cable announced that the terminated deal was mutually agreed and said it is confident it will continue to create significant value for shareholders.

Market Insights 4/23/2015

Nasdaq Leads Equities Higher

The U.S. equity markets overcame some early morning weakness and finished the trading session higher with the Nasdaq advancing to a record close after a more than 15-year hiatus from its previous milestone finish.

Another storm of earnings reports hit the Street along with some softer-than-expected economic data which may have aided in an advance for Treasuries. Gold was also higher and crude oil prices rallied, while the U.S. dollar was lower.

The Markets…

The Dow Jones Industrial Average advanced 20 points (0.11%) to 18,059

The S&P 500 Index added 5 points (0.24%) to 2,113, 8 of the 10 S&P sectors finished higher with Industrials -.11% and Consumer Staples -.34% giving back ground while Energy +.68%, Utilities +.56% and Consumer Discretionary +.50% led the way higher.

Small and MidCaps outperformed LargeCaps with the MidCap 400 increasing by .49% and the SmallCap 600 adding on .58% on a day when the S&P 500 increased .24%

The Nasdaq Composite gained 21 points (0.42%) to 5,056

In moderate volume, 789 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude increased $1.58 to $57.74 per barrel, wholesale gasoline was $0.06 higher at $1.99 per gallon

The Bloomberg gold spot price advanced $7.57 to $1,194.70 per ounce

Jobless claims unexpectedly rise and housing misses expectations

Weekly initial jobless claims rose by 1,000 to 295,000 last week, above the 287,000 Bloomberg estimate, as the prior week’s figure was unrevised at 294,000. The four-week moving average increased by 1,750 to 284,500, while continuing claims gained 50,000 to 2,325,000, north of the forecasted 2,290,000 level.

New home sales fell 11.4% month-over-month in March, to an annual rate of 481,000 units from February’s upwardly revised 543,000 unit pace, and compared to the forecast of a 515,000 rate. The median home price declined 1.7% y/y to $277,400. The supply of new home inventory increased to 5.3 months at the current sales pace. Sales in most regions dropped, except for the Midwest. New home sales are considered a timely indicator of conditions in the housing market as they are based on contract signings instead of closings.

The preliminary Markit U.S. Manufacturing PMI Index for April declined to 54.2 from March’s 55.7 level, where economists had expected it to remain, with a reading above 50 denoting expansion. The release is independent and differs from the Institute for Supply Management’s (ISM) Manufacturing Index, as it has less historic value and Markit weights its index components differently.

Treasuries were higher, with the yields lower as the 2-year note and 30-year bond dipping 2 basis points (bps) to 0.54% and 2.64%, respectively, while the yield on the 10-year note declined 3 bps to 1.95%.

Tomorrow, the lone report on the domestic economic calendar will be the release of March durable goods orders, forecasted to rise 0.6% m/m after dropping 1.4% in February. Excluding transportation, orders are expected to increase 0.3% on the heels of the 0.4% decline in the prior month. Orders for non-defense capital goods excluding aircraft, a gauge of business spending, are projected to increase 0.3% following the 1.4% fall posted in March.

The U.S. and international manufacturing sectors are diverging. While the U.S. continues to show solid growth, several developed international markets are increasingly showing signs of struggle. The murky global outlook raises our concern for the industrial’s sector. We still believe in the industrial’s sector but lowered our outperform rating with a market-perform rating in March, in part to the strong dollar and part to slower global demand.

Europe mostly lower on data, Asia mixed following China manufacturing report

The European equity markets traded mostly lower as a disappointing read on Chinese manufacturing activity was met with a softer-than-expected report on eurozone business activity. Also, traders digested some mixed earnings reports in the region as well as across the pond. Markit’s preliminary Eurozone Composite PMI Index—a gauge of business activity out of both the services and manufacturing sectors—declined to 53.5 in April, from 54.0 in March, and compared to the 54.4 level that economists had projected. In other economic news, U.K. retail sales missed forecasts for March, while Spain’s 1Q unemployment rate came in slightly above forecasts. Finally, Greek stocks gained ground, though the nation’s debt deal uncertainty remains as the country is set to meet its eurozone counterparts tomorrow aimed at trying to gain access to further bailout aid.

Stocks in Asia finished mixed in choppy trading on the heels of a disappointing read on Chinese manufacturing activity for April. HSBC’s preliminary China Manufacturing PMI Index declined to 49.2—which would be the lowest level in a year—from 49.6 in March, where economists had expected the index to remain, with a reading below 50 denoting contraction. Markit’s preliminary Japan Manufacturing PMI Index unexpectedly showed contraction for April; while some weakness in the yen helped the equities in the region extend their 15-year high. A report from South Korea showed the nation’s 1Q GDP growth accelerated to a 0.8% quarter-over-quarter pace, from the 0.3% expansion posted in 4Q, and compared to the 0.6% growth that was anticipated. Also, some upbeat earnings reports helped South Korean stocks move higher.

Market Insights 4/22/2015

Stocks Stage Mid-Week Advance

The U.S. equity markets were able to build solid gains on the heels of some upbeat domestic housing data and as corporate earnings releases continued to flood the Street. Treasuries were decisively to the downside following the day’s economic reads, while gold was also lower, the U.S. dollar was flat and crude oil prices were mixed.

The Markets…

The Dow Jones Industrial Average advanced 88 points (0.49%) to 18,038

The S&P 500 Index added 11 points (0.51%) to 2,108, all 10 S&P 500 sectors were higher with Technology, Energy and Financials leading the way higher.

Small and MidCaps also moved higher with the SmallCap 600 moving ahead by .18% and the MidCap 400 improving .25%.

The Nasdaq Composite gained 21 points (0.42%) to 5,035

In moderate volume, 743 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude declined $0.45 to $56.16 per barrel, wholesale gasoline was $0.03 higher at $1.92 per gallon

The Bloomberg gold spot price lost $15.54 to $1,186.87 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 98.02

Existing home sales easily beat forecasts

Existing-home sales in March topped expectations, rising 6.1% month-over-month to a 5.19 million annual rate—the highest in 18 months—and compared to the Bloomberg forecast of a rise to a 5.03 million pace. February’s figure was adjusted slightly higher to a 4.89 million unit pace, while the median existing-home price jumped 7.8% from a year ago to $212,100. Single-family and multi-family sales were both solidly higher m/m and y/y, while all major regions experienced “strong sales gains,” led by the Midwest, and are above y/y levels.

Is Housing Staging a Turn for the Better?, leading indicators for housing point to the possibility that year-over-year growth in real residential investment—the housing component of gross domestic product (GDP)—could move into double-digit territory by the fourth quarter of this year; but we should probably temper those expectations given the reluctance to borrow, still-high home prices, and the possibility of higher mortgage rates. Nonetheless, housing is likely to be a brighter light illuminating the economy this year.

The MBA Mortgage Application Index rose 2.3% last week, after falling by the same amount in the previous week. The increase came as a 0.6% rise in the Refinance Index was accompanied by a 5.0% gain for the Purchase Index, with the average 30-year mortgage rate declining 4 basis points to 3.83%.

Treasuries were noticeably lower following the housing data, with the yield on the 2-year note rising 3 bps to 0.55%, the yield on the 10-year note increasing 7 bps to 1.98%, and the 30-year bond rate gaining 8 bps to 2.66%.

Tomorrow, the U.S. economic calendar will commence with initial jobless claims, expected to decrease to 287,000 from 294,000 the week prior and after the opening bell, the preliminary Markit U.S. Manufacturing PMI Index for April will be reported, expected to remain at the 55.7 level registered in March. Additional housing data will arrive with March new home sales, forecasted to decline to an annual rate of 515,000 units and rounding out the day we’ll see the Kansas City Fed Manufacturing Index, with economists expecting an increase to -2 from the -4 posted in March, with a level below zero denoting contraction in manufacturing activity in the Midwest region.

Europe mixed on earnings, Asia mostly higher

The European equity markets finished mixed, with traders sifting through a flood of earnings reports, while banks led a rebound in Greece as media reports suggested that the sector won access to further emergency funding. The reports come ahead of an April 24 meeting between Greece and its eurozone counterparts as the nation tries to please its international creditors with its reform plans in order to continue to receive bailout aid. The Bank of England’s minutes from its monetary policy meeting earlier this week showed the decision by policymakers to keep its benchmark interest rate unchanged at a record low of 0.50% was “finely balanced.” The British pound gained solid ground on the U.S. dollar and Italian industrial orders rose in February.

The U.K. FTSE 100 Index was down 0.5%, France’s CAC-40 Index rose 0.4%, Germany’s DAX Index decreased 0.6%, Spain’s IBEX 35 Index declined 0.2%, Italy’s FTSE MIB Index advanced 0.3%, Switzerland’s Swiss Market Index was up 0.6%, and Greece’s ASE Athens Index gained 2.1%.

Stocks in Asia finished mostly to the upside despite the lackluster session yesterday in the U.S. Japan’s Nikkei 225 Index closed above the key 20,000 mark for the first time in 15 years, with the yen softening somewhat, while the nation reported solid growth in exports for March. Stimulus optimism in the world’s most populous country buoyed stocks in the region on the heels of the weekend announcement by the People’s Bank of China to cut the reserve requirement ratio for banks. A slightly hotter-than-expected read on Australia’s consumer price inflation pressured local equity issues and Indian stocks snapped a five-session losing streak, led by strength in industrials.

Company Specific News

Boeing Co. reported 1Q earnings-per-share (EPS) ex-items of $1.97, above the $1.80 FactSet estimate, as revenues rose 8.0% year-over-year (y/y) to $22.1 billion, versus the $22.5 billion that the Street had projected. BA reaffirmed its full-year outlook.

Coca-Cola Co. announced 1Q EPS ex-items of $0.48, above the forecasted $0.42, with revenues growing 1.0% y/y to $10.7 billion, versus the expected $10.6 billion. The company said organic revenues—adjusting for currency fluctuations, acquisitions and divestitures—rose 8.0%, reflecting higher pricing, increased mix of more profitable drinks, and cost discipline. KO’s gross margin came in above forecasts and the company said it anticipates full-year EPS growth to be mid-single-digits, roughly inline with the growth rate in 2014.

McDonald’s Corp posted 1Q adjusted profits of $1.01 per share, below the $1.06 estimate, with revenues falling 11.0% y/y to $6.0 billion, roughly inline with forecasts. 1Q global same-store sales fell 2.3% y/y, compared to the 2.0% decline that was anticipated, “reflecting negative guest traffic in all major segments.” MCD said it expects April global same-store sales to be negative. The world’s largest fast-food chain noted that it is developing a turnaround plan to improve performance and deliver enduring profitably growth, with details slated to be shared on May 4.

Yahoo Inc. reported 1Q EPS ex-items of $0.15, below the expected $0.18, with revenues excluding traffic acquisition costs declined 4.0% y/y to $1.0 billion, versus the projected $1.1 billion. YHOO said it saw display revenue growing a “modest” 2.0%, while its mobile revenue surged 61.0% y/y, including TAC.

Yum Brands Inc. announced 1Q earnings ex-items of $0.80 per share, north of the anticipated $0.71, as revenues decreased 4.0% y/y to $2.6 billion, versus the $2.7 billion that was expected. The parent of Taco Bell, Pizza Hut and KFC said its China division same-store sales fell by a smaller amount than forecasted. The company said it expects full-year EPS growth of at least 10.0%, with a strong second half in China and solid brand-building initiatives underway at each of its divisions.

Chipotle Mexican Grill Inc. posted 1Q EPS of $3.88, above the estimated $3.65, as revenues rose 20.4% y/y to $1.1 billion, mostly inline with expectations. Same-store sales increased 10.4% y/y, below the 11.7% rise that was expected. CMG said it suspended one of its primary pork suppliers and is exploring options to increase the supply of pork. Shares are solidly lower.