The Investor Guide to Vanguard Funds for April is Now Available click here to read Links to the Vanguard Data are posted below. Market Perspective: Dividend Payers Lead as Stocks […]
March retail sales ex-autos increased 0.1 percent, in line with expectations. A drop in auto sales, however, pulled the total to -0.3 percent. Auto stocks nonetheless rose more than 2 percent on the day.
CARZ is down about 20 percent from its peak last summer, but the group is expected to report strong earnings in the first quarter. A move past $33.50 would lift CARZ to a 3-month high.
iShares US Medical Devices (IHI) iShares US Health Providers (IHF) iShares Nasdaq Biotechnology (IBB) SPDR Pharmaceuticals (XPH)
The healthcare sector is expected to report positive first-quarter earnings growth. Medical devices have already climbed to a new 52-week high. Medical providers, biotech and pharma have weighed on the sector, but have recently rebounded. A shift towards biotech and pharma is likely as investors rotate into cheaper shares, but momentum investors may stick with the leading medical device sector.
SPY, DIA, MDY and IWM are all at key junctures. The S&P 500 Index and Dow Jones Industrial Average are on the verge of setting new all-time highs, while the mid- and small-cap indexes are approaching levels which marked short-term peaks over the past nine months.
SDY shows dividend shares remain popular with investors, with the fund pressing on to new highs while keeping pace with SPY. Often there is a rotation from defensive shares into more aggressive sectors when the market rallies from a pullback, but charts have yet to indicate a shift.
WisdomTree Bloomberg USD Bullish (USDU) CurrencyShares Euro Trust (FXE) CurrencyShares British Pound (FXB) CurrencyShares Canadian Dollar (FXC) CurrencyShares Japanese Yen (FXY) WisdomTree Emerging Market Currency (CEW)
The U.S. dollar spent another week around the low end of its trading range. Emerging market currencies pushed to new 2016 highs on the back of stronger oil prices, as did the Canadian dollar.
The most watched currency of the moment is the Japanese yen. A reversal to 2014 levels, or roughly 100 yen to the U.S. dollar, is possible.
SPDR Energy (XLE) FirstTrust ISE Revere Natural Gas (FCG) Global X Copper Miners (COPX) Market Vectors Coal (KOL) Market Vectors Steel (SLX)
Crude oil prices are rising ahead of OPEC’s meeting in Doha this weekend. Trading may lighten as the week closes as traders limit exposure to a potential shock.
Commodity prices rebounded on Wednesday following stronger Chinese export data. Steel saw the largest gain as it benefits from protectionism.
Energy advanced as oil prices pushed back above $40 a barrel. Homebuilders have enjoyed a strong rally this year, bringing ITB back to the trading range where it spent all of 2015. A couple of homebuilders already reported strong earnings in March. Homebuilder confidence for April, housing starts, building permits and existing home sales for March will be released next week.
iShares iBoxx High Yield Corporate Bond (HYG) iShares iBoxx Investment Grade Corporate Bond (LQD)
LQD finally took a breather last week, ending a two-month uninterrupted rally. The first half of LQD’s rally, from mid-February to mid-March, was driven by easing credit concerns and occurred with rising treasury yields. LQD rallied further as treasury yields fell into April. Last week’s jump in treasury yields, and the dip in LQD, indicates interest rates are now driving the market. High yield bonds, in contrast, pushed higher as investors reacted to rising oil prices.
Gold miners enjoyed a blow-off rally over the past week, a move driven by short-covering. Short interest in mining shares started falling in late March and likely accelerated in the past week as prices spiked. Gold prices fell sharply on Wednesday as investors moved to riskier assets
One of the stronger emerging markets at the moment is Malaysia. Shares have recovered from the August 2015 sell-off and are approaching the $9.25 level that market support in early 2015. Economic growth in Malaysia tops 4 percent and faster growth is possible. Unlike China, which is dealing with an aging population, Malaysia has a positive demographic dividend.
First Trust Dow Jones Internet (FDN) PowerShares Nasdaq Internet (PNQI)
FDN and PNQI fell nearly 25 percent from the end of 2015 into early February. Since then, they have recovered, but as the price ratio chart of PNQI to SPY shows, these shares only outperformed for a little over a week before losing momentum. The flat line in PNQI shows investors have done as well in SPY as PNQI over the past two months.
Domestic Internet firms anticipate a strong earnings season. With positive results from major components such as Facebook (FB), the sector could quickly challenge 2015 highs. The first big Internet stock to report will be Netflix (NFLX), after the bell on Monday April 18, followed by Amazon (AMZN) on April 21 and Facebook on April 27.
In addition to the start of a new earnings season, numerous economic reports are due out. Today’s unexpected closed-door Fed meeting could also influence this week’s trading.
The major indices entered the week in a consolidation phase, a natural occurrence in the wake of the recent sharp rally. Crude oil surged from the mid-$20s to $40 a barrel. The S&P 500 Index rallied 13 percent from its February 11 closing low and has spent the past three week moving sideways as investors adjust their portfolios, taking profits in sectors such as energy, and buying sectors such as healthcare.
Federal Reserve Chair Janet Yellen will meet with President Obama today following a special Fed meeting under “expedited procedures.” The last time the Fed called a special meeting, it was to raise the discount rate in November 2015, ahead of hiking the Fed funds rate in December. Assuming the Fed doesn’t make significant news, investors will quickly turn their attention to earnings season.
Analysts expect S&P 500 earnings to decline 9.1 percent, driven by falling energy earnings. Pessimism has been the rule heading into earnings season, however, and the past several years have beaten low-ball predictions. The first group of firms to report this week are the behemoth banks: JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C).
On Wednesday, JPM is expected to report earnings per share of $1.26 on revenues of $23.44 billion. Consensus estimates for BAC’s Tuesday report call for earnings per share of $0.22 and revenues of $21.42 billion. Wells Fargo (WFC) will release its quarterly earnings on Thursday. The firm is expected to report earnings of $0.98 per share on top line revenues of $21.62 billion. Citigroup (C) is set to release its earnings report Friday, with estimates of earnings per share of $1.09 and revenues of $17.62 billion. The company is heavily weighted in the industrial and transportation sectors, which rebounded strongly in the first quarter.
Analysts forecast CSX Corp (CSX) will report earnings per share of $0.37 and $2.68 billion in sales. Delta Air Lines (DAL) is expected to report earnings per share of $1.30 and revenue of $9.26 billion. Analysts are looking for Fastenal (FAST) to deliver earnings per share of $0.45 and $989 million in sales.
Alcoa (AA) is scheduled to report after the closing bell on Monday. The firm is expected to report earnings per share of $0.03 on $5.13 billion in revenue. Alcoa is in the eye of the China slowdown storm and has struggled with its own restructuring and low aluminum prices which did not rebound as much as oil and copper.
China’s consumer price index (CPI) dipped in March, while producer prices rebounded with rising oil prices. Later this week, the country will report March imports and exports, retail sales and fixed asset investment. Although not scheduled, new loans and money supply are also likely to be released. This data heavy week in China could impact industrial commodities, such as copper, and given the concern over the Chinese yuan, it may also impact regional currencies like the Korean won.
The Federal Reserve Beige Book, a collection of economic indicators from regional Fed banks, will be released Wednesday. In addition to weekly unemployment claims, the latest consumer price Index from the Bureau of Labor Statistics will be released on Thursday. The BLS figure has been running hotter than the Fed’s preferred core PCE number. Month-on-month core inflation of 0.2 percent is expected. Retail sales for March and business inventories will be out on Wednesday. Friday’s industrial production and capacity utilization numbers could impact first quarter GDP estimates.
Click Here to read this weeks issue of the Global Momentum Guide WEEKLY SECTOR PERSPECTIVE Equities continued to consolidation phase last week. Healthcare enjoyed sector rotation and value buying, while […]
The stock market consolidated recent gains with small losses on the week. Declines were driven primarily by global trends, such as a sharp rally in the yen, often used by traders to fund asset purchases.
During a panel discussion Thursday evening, current Fed Chair Janet Yellen touted the strength of the U.S. labor market and said that the Fed was still on track to raise interest rates twice in 2016. These comments were followed by news of a special Fed meeting scheduled for Monday, to discuss the discount rate. The last time such a meeting was held was November 2015, when the Fed raised the discount rate ahead of December’s hike in the Fed funds rate. Financials and utilities rallied Friday, nonetheless.
The latest Labor Market Conditions Index indicated a 2.4-percent drop from the previous report. The Jobs Opening and Labor Turnover Survey (JOLTS) remained in-line with last month’s report and reflected continued strength in employment. The March ISM Non-Manufacturing Index released a reading of 54.5, up from the previous month’s 53.4 and above the consensus estimate of 54.0, indicating a stronger service sector. On Thursday, the latest weekly unemployment claims report showed the number of Americans filing for first time benefits was down slightly from last week, as expected.
Walgreens (WBA) reported a second-quarter sales increase, though growth fell short of expectations at $0.85 per share versus estimates of $1.28. The company was hit by a stronger dollar and a weaker-than-expected cold and flu season. Bed Bath and Beyond (BBBY) shares rallied on its fourth-quarter results, exceeding analysts’ projected EPS of $1.81 and top-line revenues estimate of $3.38 billion with actual EPS of $1.91 on revenues of $3.42 billion. On Thursday, Rite Aid (RAD) reported EPS of $0.07, beating consensus estimates by a penny per share on revenues that were slightly below expectations. CarMax (KMX) also beat consensus estimates with earnings of $0.74 per share on revenues of $3.71 billion.
Positive data and current global accommodative monetary policies remain favorable for the markets. Consolidation is proceeding as expected and the big banks will shift the focus to earnings next week.
