Month: May 2017

The S&P 500 closed at a new all-time high of 2399.29 last week. The Dow Jones Industrial Average, Nasdaq and Russell 2000 all remain near all-time highs as well. The CBOE Volatility Index (VIX) fell to 9 last week, and continued dropping on Monday to the lowest level since 1993.

Analysts expect Disney (DIS) report $1.45 per share in earnings on Tuesday. Priceline (PCLN), Allergan (AGN), Duke Energy (DUK) and Nvidia (NVDA) will also report on Tuesday. On Wednesday, Snap (SNAP), maker of Snapchat, will deliver its first earnings report since its March IPO. Troubled pharmaceutical company Mylan (MYL) is also scheduled to report on Wednesday.

Retail season kicks off on Thursday with reports from Macy’s (M), Nordstrom (JWN) and Kohl’s (KSS), followed by. J.C. Penney (JCP) on Friday. Headline retail sales and retail sales ex-autos data is due out on Friday.  Both are forecast to rise 0.5 percent.

The April consumer price index will also be out on Friday. Economists expect the headline and core CPI will both reflect 0.2 percent growth. The University of Michigan consumer sentiment for May, also scheduled for release on Friday, is expected to reach 97.3.

June rate hike expectations are up to 83 percent. Long-term bond yields rallied into Monday with the 10-year Treasury yield at 2.37 percent.

China’s export and import growth showed solid growth year-over-year in April, but missed forecasts, while the trade balance came in above expectations. China’s April CPI, PPI, and new loan growth will be out later in the week. China has targeted shadow banking and the housing market over the past six weeks.

OPEC cuts will expire at the end of June, but OPEC expects slack demand in the first quarter of 2018 and may propose a nine-month extension. The rig count in the U.S. is at its highest since the mid-1980s and production could approach all-time highs this year. West Texas Intermediate crude fell below $45 a barrel last week.

Last week, the House of Representatives passed a partial reform of the Affordable Care Act. The Senate isn’t expected to vote on the bill, but instead offer its own proposal, potentially slowing tax cut legislation.

Equities finished the week higher following Fed optimism and a better-than-expected jobs report. The Dow closed the week at 21,006.94, up 0.26 percent on the day. The S&P 500 Index gained 0.41 percent and the Nasdaq climbed 0.42 percent. For the week, the Dow gained 0.30 percent, and the S&P 500 gained 0.60 percent. The Nasdaq closed the week up 0.90 percent.

211,000 jobs were created in April, beating estimates of 190,000, and more than double March’s 79,000 new jobs. The U-3 unemployment rate fell to 4.4 percent and average hourly earnings increased 0.3 percent. The U-6 unemployment rate fell to 8.6 percent, down from 9.7 percent one year ago and 9.4 percent in January. The leisure and hospitality sector led with 55,000 new jobs. Healthcare added 37,000 workers and financials 19,000. Government added 17,000.

The April employment data pushed the odds of a June rate hike as high as 83 percent on Friday. Odds of a rate hike also rose earlier in the week following the Federal Open Market Committee (FOMC) meeting.

West Texas Intermediate crude slumped to $45 a barrel before bouncing to $46 on Friday. The slide comes amid rising U.S. production and elevated inventories. Speculators could keep oil below $50 for the near future. Weakness in oil was largely contained within the energy sector, but some high-yield funds declined in sympathy.

The April manufacturing PMIs were lower than expected, but still reflect expansion in the manufacturing sector. The services PMI came in at 57.5, above the estimate of 56 and March’s 55.2 reading. Weekly unemployment claims fell to 238,000, below expectations of 245,000. The March trade deficit was also below expectations at $43.7 billion. Productivity fell 0.6 percent in the first quarter, below the 0.0 percent forecast. Unit labor cost rose 3.0 percent.

Apple (AAPL), Pfizer (PFE), Merck (MRK), Facebook (FB) and Mastercard (MA) all beat earnings estimates this week. Apple shares initially dipped on disappointing iPhone sales, but pushed to another new all-time high on Friday.

Financials led sector performance this week, followed by industrials and healthcare. Energy was by far the worst performer, losing about 1.5 percent on the week.

An S&P 500 rally of less than 1 percent would breach 2400 and another all-time high. The Dow Jones Industrial Average is also less than 1 percent from its all-time high, while the Nasdaq and Russell 2000 set new all-time highs last week.

Rising consumer confidence reflects the bullishness in the stock market.

Apple (AAPL) grew earnings by 10 percent and revenues by 4 percent, but analysts focused on a drop in iPhone sales. Shares of Apple fell more than 2 percent overnight, but rebounded in Wednesday trading as optimistic investors looked forward to the iPhone 8 later this year.

April car sales slipped to an annualized pace of 16.9 million, up from March’s pace of 16.6 million, but below expectations of 17.2 million. Shares of Ford (F) and General Motors (GM) fell on the day. This rate of car sales is consistent with a strong economy and high consumer confidence, but automakers spent more on incentives to move high inventory in April, cutting into profits.

Energy stocks made a new 2017 low this past week as oil prices fell. SPDR Energy (XLE) is flirting with a new 6-month low.

Copper tumbled more than 3 percent, near its 6-month low, on Wednesday after inventory jumped.

Steel and coal are also moving lower as China tries to cool its real estate market and simultaneously deleverage its financial system.

Earnings in the pharma sector were solid on Tuesday, with both Merck (MRK) and Pfizer (PFE) beating estimates. On Wednesday, however, offices of Perrigo (PRGO) were raided by the Justice Department as part of an investigation into price fixing. Other firms also under investigation, such as Mylan (MYL), declined in sympathy.

The broader healthcare sector is near its all-time high as Republicans continue to negotiate the amendment to revamp the ACA.

The U.S. dollar slumped against the euro on April 24, but has firmed in recent days. The Bloomberg U.S. Dollar Index has stabilized since late March. USDU has larger exposure to the Canadian dollar. The Canadian loonie (a one dollar coin) has fallen 3 percent over the past two weeks due to troubles at the country’s largest subprime mortgage lender.

The Federal Reserve left rates unchanged, as anticipated, at today’s meeting. June rate hike odds are holding steady at 70 percent. Floating-rate funds started moving higher again as investors start banking on that hike.

Longer-term bond yields such as the 5-, 10- and 30-year Treasury are back at the bottom of their 2017 trading ranges.

Corporate bonds are near their 52-week highs, and the high-yield bond ETF HYG has already hit a new all-time high.

Semiconductors have led the tech sector for much of the year, but fell in April. Advanced Micro Devices (AMD) missed earnings estimates and networking stocks are also underperforming. In contrast, the software sector popped in mid-April and hasn’t slowed yet. Internet and social media shares are doing even better. The social media ETF has gained 10 percent in the past three weeks.

iShares U.S. Home Construction (ITB), PowerShares Dynamic Building & Construction (PKB) and Guggenheim Timber (CUT) all hit new 52-week highs over the past week. Strong earnings from Martin Marietta Materials (MLM) lifted the construction sector on Tuesday.

The S&P 500 and Dow are both less than 1 percent away from setting new all-time highs, while the Nasdaq set a record for intraday and closing highs. The blended earnings growth rate hit 12.5 percent last week after a string of strong technology and industrial reports.

Apple (AAPL) will report earnings on Tuesday. The consensus forecast calls for earnings of $2.01. Pfizer (PFE), Merck (MRK), Gilead Sciences (GILD), Altria (MO), Mastercard (MA), B.P. (BP), Charter Communications (CHTR), CVS Health (CVS), Mondelez (MDLZ) and ConocoPhillips (COP) will also release reports on Tuesday.

Facebook (FB) will report on Wednesday. Analysts are looking for 54 percent earnings growth to $0.88 per share in the first quarter. Kraft Heinz (KHC), Novo Nordisk (NVO), Reynolds American (RAI), Time Warner (TWX), Tesla (TSLA) and Southern Company (SO) will also report.

Earnings will slow down later in the week. HSBC Holdings (HSBC), Ambev (ABEV), Occidenta Petroleum (OXY) and Moody’s (MCO) will report on Thursday and Friday.

The core Personal consumption expenditures price index (core PCE) fell 0.1 percent in March, while headline PCE declined 0.2 percent with oil prices. Interest rate expectations for the June Fed meeting are holding steady at 66 percent.

The Markit and ISM Manufacturing surveys came in below expectations, although both showed expansion in the manufacturing sector. Markit’s April reading was 52.8, ISM’s was 54.8. Construction spending in March dipped 0.2 percent, most likely due to late winter storms. Spending was up 3.6 percent from year-ago levels.

April auto sales data will be available on Tuesday. This will be important for second-quarter personal consumption forecasts. The Atlanta Fed’s initial GDP growth forecast for the second quarter is 4.3 percent. First-quarter productivity and unit labor costs and March factory orders will be released on Thursday, and the monthly employment report is due on Friday.

Overseas, major markets were closed on Monday for May Day across Europe and Asia. Europe’s manufacturing PMIs will be released Tuesday due to the holiday. Japan’s market will close Wednesday thru Friday for three separate holidays. The Australian central bank will hold a policy meeting on Tuesday.

Energy prices started the week on the decline, with West Texas Intermediate crude oil falling below $49 a barrel. Energy equities slipped as well. Energy sector funds are threatening to close at a new 2017 low this week.

Treasury bond yields advanced on Monday, led by 10-year and 30-year Treasury yields. The U.S. dollar opened the week flat, gaining against the yen, British pound and Canadian dollar, but weakening versus the euro and Australian dollar. The Federal Reserve meets on Wednesday.