After The Close - Stocks opened the week in unexciting fashion following the long holiday weekend. With earnings season set to move into high gear, investors are likely waiting to see what bellwether corporations have to say about their performance and prospects in the coming days.
To be sure, several companies reported first-quarter results today, with their stocks reacting accordingly. Pricing power and revenue generation appeared to be key drivers. For instance, shares of Kimberly-Clark (KMB) rose when the consumer staples leader turned in better-than-expected profits, helped by its ability to pass along costs.
The story was different at W.W. Grainger (GWW), where earnings surpassed analysts’ estimates, but revenues came up short. Grainger stock fell as a result.
In terms of market sectors, a jump in oil prices helped shares of energy-related companies outperform on the day.
Oil prices in New York trading climbed $1.66 a barrel for the domestic benchmark blend, to $65.66, on word that the Trump Administration is not extending waivers to purchase oil from Iran. Several nations, including China and India, were granted waivers allowing them to avoid sanctions for buying crude oil from Iran. But those exceptions are now set to expire in early May.
The thinking is that Saudi Arabia, Russia, and the United States can pump more to make up the loss of exports from Iran. But investors are not entirely sure how tight supplies will become. Iran has threatened to shut the key Strait of Hormuz oil shipping lane if it has to.
Elsewhere, today’s stock market action was dampened by a report from the National Association of Realtors that showed sales of existing homes fell more than expected in March. There had been some hopes that lower mortgage rates would provide more support than proved the case. Shares of homebuilders, such as D.R. Horton (DHI), slipped as a consequence.
At the closing bell, the Dow Jones Industrial Average was down 48 points; but the NASDAQ gained 17 points and the S&P 500 inched ahead three points. Market breadth was tilted to the downside, though. The number of declining issues outpaced gainers by a three to two margin on the New York Stock Exchange.
There is a good chance that stocks will establish a more clear-cut tone in the coming days as earnings reports flood in. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - U.S. investors returning from the long holiday weekend will be greeted by a plethora of earnings reports and some important economic data this week. So far, the first-quarter earnings season has proven constructive for investors, with a number of solid reports, including the latest quarterly results from industry heavyweights JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report), Travelers Cos. (TRV – Free Travelers Stock Report), and UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report), among others. The positive earnings news, along with some recent encouraging economic data, including a solid report on employment earlier this month, are giving equities a further boost after a strong performance over the first three months of the year, which was predominantly driven by accommodative Federal Reserve monetary policy and some positive sentiment regarding a possible trade deal between the United States and China.
The latest abbreviated week on Wall Street (the U.S. equity market was closed on Friday for Good Friday, which also coincided with the start of Passover) was another win for the bulls, though a rather nominal one. The Dow Jones Industrial Average and the NASDAQ advanced 0.6% and 0.2%, respectively, while the broader S&P 500 Index finished relatively flat. The aforementioned solid round of U.S. earnings news and positive economic data from China was somewhat offset by growing concerns about escalating trade tensions between the United States and the euro zone. Indeed, the start of the first-quarter earnings season, which kicks into high gear this week, has proven constructive for equities and may suggest that the fears about a domestic slowdown this year may have been a bit overblown. Likewise, the economic news from China last week was encouraging, as the world’s second-largest economy rebounded in the March, a welcome sign of stabilization for the global economy. Specifically, China’s GDP expanded at an annualized rate of 6.4% during the first three months of 2019, matching last quarter’s pace and beating economists’ estimates. China’s factory output in March jumped 8.5% year over year and retail sales expanded 8.7%.
As noted, the earnings news heats up, with a number of Dow-30 companies scheduled to report, including aerospace behemoth Boeing (BA – Free Boeing Stock Report), which has been in the news for all the wrong reasons the last six weeks, on Wednesday and oil giants Exxon Mobil (XOM – Free Exxon Mobil Stock Report) and Chevron (CVX – Free Chevron Stock Report) on Friday. Meantime, the economic data will include reports on existing and new home sales (the former will be released at 10:00 A.M. (EDT) this morning) and durable goods orders. Then on Friday, investors will be get the initial estimate on first-quarter GDP from the Department of Commerce. Last Friday, the Commerce Department’s report on housing starts was disappointing. Specifically, March housing starts came in at a seasonally adjusted annual rate of 1.14 million units, which was down 14.2% year over year and 0.3% sequentially, and the lowest figure since May 2017. Building permits, an even more forward-looking indicator of building activity, fell 1.7% last month.
With less than an hour to go before the start of the last full trading week of April, the equity futures are indicating a modestly lower opening for the U.S. stock market. Overseas, the main indexes in Asia finished mixed overnight, while trading is light in Europe today on what remains a holiday for most investors across the Continent. This week, U.S. investors may want to keep a close eye on the technology sector, as a number of industry heavyweights, including Microsoft (MSFT - Free Microsoft Stock Report), Amazon.com (AMZN), and Facebook (FB), are scheduled to report their latest quarterly results. In addition to the heavy earnings news, the investment community will be watching the ongoing trade negotiations between the United States and China. Stay tuned. – William G. Ferguson