Market Perspective for April 13, 2015

U.S. equities will have a realistic shot at reaching new record highs over the coming days. The Dow Jones Industrial Average is less than 2 percent away from its all-time high, while the Nasdaq is in striking distance of a level it hasn’t reached in 15 years.

Earnings will determine whether the indexes can actually achieve these new highs. Several sectors will see heavy reporting this week, led by the financial sector. Transportation and technology will also see a number of important firms release earnings.

On Tuesday, Johnson & Johnson (JNJ), J.P. Morgan (JPM), Wells Fargo (WFC) and Intel (INTC) report. They combine for more than $950 billion in market capitalization. CSX Corp (CSX) and J.B. Hunt (JBHT) also report on Tuesday, and they combine for more than 7 percent of the Dow Jones Transportation Index.

On Wednesday, Bank of America (BAC), U.S. Bancorp (USB) and PNC Financial (PNC) report, as does Delta Air Lines (DAL), which is 3 percent of the Transportation index. Widely-held Netflix (NFLX) also reports.

On Thursday, Citigroup (C), American Express (AXP) and Goldman Sachs (GS) are joined by UnitedHealth Group (UNH), Taiwan Semiconductor (TSM), Philip Morris International (PM) and Schlumberger (SLB).

On Friday, General Electric (GE) and Honeywell (HON) conclude this week’s major announcements.

Most recently, the focus has been on China and currency markets. China’s stock market boom continued on Monday, but trade data for March was abysmal. Imports were down slightly more than expected, but exports fell by double digits and far below estimates for high single-digit growth. The Chinese yuan is still tightly linked to the U.S. dollar and that’s making Chinese exports expensive. Additionally, China relies on emerging markets for export growth, but they’re seeing their own exports plunge because China isn’t importing as much copper, aluminum, coal and other raw materials. For now, the markets have taken China’s weak report in stride and Chinese investors are buying up stocks on expectations the government will directly invest in the stock market, as well as devalue the currency.

The domestic calendar will see some key data points released this week. On Tuesday, retail sales and producer prices for March, and business inventories for February, will be released. Industrial production and capacity utilization is out on Wednesday, while the consumer price index will be released on Friday. The CPI is expected to have increased 0.3 percent in March. According to Price Stats, monthly inflation (measured daily) peaked at a rate above 0.7 percent, so a CPI higher than 0.3 percent is possible.

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