Loading...
 

After The Close - The major U.S. equity indexes extended last week’s gains during the first session of the new trading week—the S&P 500 Index rose for the fifth consecutive session—but it still was not an overly convincing win for the bulls. The averages traded in a tight positive band for much of the day in a low-volume environment. We think there were a few reasons for the lack of activity, including many traders still being away for the long-holiday weekend and maybe a bit of apprehension to make a major move ahead of a heavy dose of earnings reports the next four days. In fact, nearly one-third of the S&P 500 companies are scheduled to report their latest quarterly results this week.

At the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were 41, 26, and seven points higher, respectively. Overall, advancing issues led decliners on both the Big Board and the NASDAQ, but the margin was nowhere near as wide as last week. The Volatility Index (or VIX), also known as the fear gauge, continued to ease, likely prompted by the slightly better-than-expected earnings news so far during the first-quarter reporting season. Also, there has been no more news the last few days that geopolitical tensions in Eastern Europe have escalated further—although that situation remains fluid and can change on the dime.

It was also a rather quiet day on the business beat today, but the rather uplifting economic reports from the last fortnight seem to be still giving the bulls a boost. However, just after the commencement of trading on these shores, the Conference Board reported that its leading economic indicators rose by 0.8% in March after climbing by 0.5% in the prior month; the consensus expectation called for an advance of 0.7%. The investment community appeared pleased with the report, as it was yet another indication that the U.S. economy is gaining traction and may be set up for a more formidable advance during the second half of this year. Meanwhile, the rest of this week will be dominated by housing market news, with data due on existing and new home sales on Tuesday and Wednesday, respectively. This data may impact the homebuilding stocks, which have been among the biggest laggards over the last few weeks.

Speaking of stocks that have been on a wild ride this year, investors should note that the biotechnology sectors performed well today and that, along with the pharmaceuticals, gave a nice boost to the healthcare sector. In addition to healthcare, there was some leadership from the energy stocks, which have been helped of late by crude oil prices that remain above $100 a barrel on the New York Mercantile Exchange. Conversely, it was not a good day for those long the basic materials stocks, which were the worst performing group among the top-10 sectors. Within the basic materials space, the steel issues and, to a lesser extent, the precious metals and mining stocks were out of favor. All told, after the aforementioned sectors, there were not many pronounced moves in either direction, which was a microcosm of the broader market’s performance. That said, one stock that did not fare well today was lululemon athletica (LULU), which fell to a month low on growth concerns following the company’s uneventful analyst day conference last Thursday.

Looking ahead to the remainder of this week, it will be interesting to see if today turned out to be the calm before the storm or just a case of some investor fatigue after a very volatile two-week stretch on Wall Street. As noted, there is certainly a lot of news over the next few days that can move the market in either direction. The bulls are once again in the driver’s seat, but that could change quickly if the economic or earnings news were to disappoint over the next few days. - William Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

-

12:30 PM EDT - The U.S. stock market got off to a decent start this morning, pulled back after about an hour into the session, and is now moving modestly higher once again. At just past noon in New York, the Dow Jones Industrial Average is up 26 points; the broader S&P 500 Index is ahead four points; and the NASDAQ is tacking on 16 points. Market breadth suggests a somewhat mixed tone to the day as advancing stocks are just modestly ahead of decliners on the NYSE. Most of the market sectors are making progress. Specifically, there is strength in the healthcare group, thanks to gains in the pharmaceuticals names. The defensive utilities, too, are having a solid day. In contrast, select consumer names are off a bit, with weakness in some of the apparel makers.

Technically, the market is holding up well, following last week’s rally. Notably, trading volumes have been respectable lately, too, suggesting some commitment on the part of the bulls. The rally has positioned the S&P 500 Index well above its 50-day moving average, located at roughly 1,855. From here, it remains to be seen if stocks can press higher, without taking a pause. Earnings season will still play a role in the market’s direction. While still early, the reports have largely matched expectations, so far. However, there are still many more reports to come.

It was a quiet day for economic news. However, the Conference Board’s Index of Leading Indicators increased 0.8% in March, which was largely in keeping with expectations. Over the next few days, we should get a better sense of how the real estate markets have been progressing. Tomorrow, existing home sales for March will be released. Also, the FHFA Housing Price Index for February is due out. Then, on Wednesday, new home sales for March will be released. Investors are likely looking for a continued recovery in this vital sector of the economy.

Traders received a few earnings reports to sift through morning. Specifically, Halliburton (HAL) is seeing its stock is moving up today, after the oil giant put out healthy results. Kimberly-Clark (KMB) issued a respectable report, but the stock is trading slightly lower, nevertheless. Meanwhile, after the closing bell today, we hear from growth leader Netflix (NFLX). - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

-

Stocks to Watch from The Survey A new week brings a new batch of earnings reports, although today’s calendar is relatively light as traders and investors return to the markets after the Easter holiday (exchanges were closed on April 18th for Good Friday). Early indications are that investors were pleased with quarterly results from household products maker Kimberly-Clark (KMB), oilfield services provider Halliburton (HAL), and toymaker Hasbro (HAS). However, the biggest winner appears to be Advanced Micro Devices (AMD). Indeed, that issue is up notably ahead of the bell, after the semiconductor company posted a surprising profit (on an adjusted basis) in the first quarter. It was not all good news, however, and investors punished shares of athenahealth (ATHN) after the healthcare information services company reported March-period financials that missed the mark. 

On the M&A front, news reports surfaced regarding two potential blockbuster deals, although neither transaction appears to be going anywhere, at least at this point. In the first, drugmaker and Dow-30 component Pfizer (PFEFree Pfizer Stock Report) reportedly approached industry peer AstraZeneca (AZN) about joining forces in a deal that could have been worth some $100 billion. Precious metals companies Barrick Gold (ABX) and Newmont Mining (NEM) were said to have engaged in similar talks, also to no avail. Still, investors took the news to heart, and shares of AstraZeneca and Newmont are up notably in the premarket, as a result. – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Before The Bell - Wall Street came into last week reeling from nearly a fortnight's worth of progressively weaker closes, as concerns about earnings, the economy, international matters, and valuations had combined to clearly take the measure of the suddenly chastened bulls. The Street came out of the holiday shortened week (Good Friday) boasting strong returns for the four-day stretch, with the leading averages mostly securing additional gains on Thursday, to conclude the week. All told, the Dow Jones Industrial Average, under pressure from International Business Machines (IBM - Free IBM Stock Report), eased by 16 points, while the Standard and Poor's 500 index rose almost three points, and the tech-laden NASDAQ was better by nine points, with advancing issues topping decliners on the Big Board.

Now, it is not that these problems have suddenly vanished. In fact, they remain with us, with no measurable diminution of intensity. To wit, the profit picture can only be generously termed as mixed, with the likes of tech stalwarts International Business Machines and Google (GOOG) distressing investors, while a number of financial services and industrial-sector players have turned in uneven performances for the recently concluded period. Overall, and given the low expectations entering the quarter, the picture has been a bit better than advertised, in our view.

Meanwhile, on the economy, the aggregate thrust of the reports has been favorable, with surveys showing gains in consumer sentiment, industrial production, and housing construction. Even producer prices showed some strength to the evident relief of a Federal Reserve that is still chagrined by the troubling prospect of deflation. It should be noted, however, that Fed Chair Janet Yellen has said that despite the improvement in the economy, inflation was likely to lag behind. This opinion would seem bullish for retaining low interest rates, but probably not helpful for accelerating economic growth.

As to the international sphere, economic and political matters abound, with a report out of China indicating that the world's second- largest economy has again given evidence that it is slowing its rate of growth. More ominous, the situation in Ukraine seems to go from bad to worse, with a Cold War era-type standoff between Russia and the United States now in place and unlikely to fade away anytime soon. Our sense is that a long-lasting solution to this problem will remain elusive for some time, and that has the potential to rattle the financial markets from time to time across the globe. Finally, there is the subject of valuations, which remain high and have only come down very marginally when stocks have stumbled, such as they did in early April.

Regarding the outlook going forward, we face another busy week in the coming five days, with economic data of note on the housing front, where we will be getting reports on sales of existing homes (tomorrow), and on new homes (on Wednesday). Also, there will be surveys on home prices and mortgage applications, as well as issuances on weekly and continuing jobless claims and orders for durable goods. But the big news will again be on the earnings front, where first-quarter bottom-line tallies are continuing to come out en masse, with another 10 Dow companies, or so, due to issue their latest metrics in the coming five sessions.

Looking at the market, we seem to have weathered the latest temptation to take profits, with the NASDAQ and the Russell 2000, the two recent weak links in the chain, having come fairly close to correction territory, which is defined as a 10% pullback. In fact, the NASDAQ had come perilously close to that figure last Tuesday, only to see a reversal of note ensue shortly thereafter. That upturn, which continued through the balance of the week, allowed this index to move securely away from such a correction. The other key averages, meantime, also held their ground and turned nicely higher, while the VIX volatility index, or the fear gauge, reversed a little of its earlier rise, when stocks started to rebound.

As to the markets, most of the bourses in Europe were closed today in observance of Easter Monday. But on our shores, the S&P 500 Index futures are essentially mixed, but the NASDAQ futures are suggesting a notably higher opening when trading resumes in less than an hour from now. As to influences in the day ahead, in addition to earnings news, there are some merger rumblings, as two gold producing behemoths, Barrick Gold Corp. (ABX) and Newmont Mining (NEM) have, for now at least, called off their talked about merger. We shall see where we go from here. It should be noted that both stocks, which have been hammered over the past year, are suggesting a higher opening this morning, with Newmont showing the greater strength. - Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.