Market Perspective for April 17, 2017

Equities entered the seventh week of a consolidation phase and moderate economic reports. Markets saw two major consolidation periods last year. The first ran from April until a week after the Brexit vote, and there was a four-month consolidation heading into the U.S. Presidential Election.

The S&P 500 Index opened the week just 2.9 percent from its all-time closing high and all major indexes edged slightly higher on Monday. J.P. Morgan (JPM) and Citigroup (C) kicked off earnings last week with better-than-expected reports, boosting the expected earnings growth rate for the S&P 500 Index to 9.2 percent. Several blue chips and major financial firms are scheduled to report this week.

Netflix (NFLX) reported 40 cents per share in earnings after the bell on Monday, beating estimates of 37 cents. Despite subscriber growth missing expectations, the stock has rallied by over 1 percent in after-hours trading.

Johnson & Johnson (JNJ), Bank of America (BAC), International Business Machines (IBM), UnitedHealth Group (UNH), Goldman Sachs (GS), Charles Schwab (SCHW) and Yahoo (YHOO) are all expected to report earnings on Tuesday.

Most of the financial sector will have reported by the end of Wednesday (as measured by market capitalization), including U.S. Bancorp (USB), Morgan Stanley (MS), American Express (AXP), BlackRock (BLK), ASML Holdings (ASML), CSX Corp (CSX), eBay (EBAY), Abbott Labs (ABT) and Qualcomm (QCOM).

Visa (V), Verizon (VZ), and Philip Morris International (PM) will report on Thursday, as well as smaller financial companies Bank of New York Mellon (BK), BB&T (BBT), The Travelers Companies (TRV), Blackstone Group (BX), KeyCorp (KEY) and Citizens Financial Group (CFG).

Industrial earnings from General Electric (GE), Honeywell (HON), and energy services giant Schlumberger (SLB) will report on Friday.

The homebuilder confidence index hit 68 in April, down slightly from March, but still near record levels of optimism. March housing starts and building permits will be out on Tuesday, followed by existing home sales on Friday. Economists expect all data points will show improvement in the sector.

Industrial production and capacity utilization will be available on Tuesday, the Fed’s Beige Book on Wednesday, and flash manufacturing and services PMIs for April will be released on Friday.

Chinese first-quarter GDP growth was 6.9 percent, 0.1 percent above estimates. Industrial production and fixed asset investment also grew faster than expected. The Eurozone’s March consumer inflation rate, an important data point for currency markets, is due out on Wednesday morning. The European Central Bank has held steady with rates and quantitative easing, despite a pickup in inflation.

Energy and interest rates will be major markets to watch this week. West Texas Intermediate crude oil opened the week at $53 a barrel. There is a trading range between $51 and $55, any move above or below would be a significant divergence for the energy sector. Analysts forecast a big draw from inventory this week.

The 5-, 10- and 30-year Treasury yields broke below their trading range last week and continued in that direction on Monday, while investment-grade and corporate bonds have broken out to the upside.

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