Market Perspective for April 18, 2016

The Dow Jones Industrial Average posted its best returns in over a month and all major averages posted gains of 1.6 percent or better. Strong earnings reports and positive economic news boosted the markets.

The chief economic driver coming into the week is the OPEC meeting in Doha, Qatar and its impact on energy prices. Word leaked on Sunday that no deal was coming. An agreement to freeze production at January 2016 levels, which are peak production levels for key nations such as Saudi Arabia, would not have done much to alleviate oversupply in the market, but it would have likely ended the battle for market share. Oil prices immediately fell 5 percent on the news before recovering.

The National Association of Home Builders survey is due out Monday, while housing starts and existing home sales for March are scheduled to be released Tuesday and Wednesday. The builder survey and existing sales are both expected to show an increase. The consensus is for a slight decline in housing starts. The Philly Fed manufacturing survey and the weekly initial unemployment claims report, which is expected to rise slightly from last week’s multi-decade low, will both be available on Thursday. The European Central Bank is expected to hold interest rates unchanged at its meeting Thursday.

This is a big week as earnings season gets into full swing. On Monday, International Business Machines (IBM) reported earnings per share of $2.35, exceeding estimates of $2.09 on revenues of $18.29 billion. Analysts will be paying particular attention to IBM’s medical services partnership with Apple. Morgan Stanley (MS) is scheduled to report earnings per share of $0.46 on expected revenues of $7.97 billion. Traders will be interested in the impact that volatility in global banking market has had on the company’s earnings. Goldman Sachs (GS) is scheduled to report EPS of $2.45 on revenues of $6.76 billion. While underperforming the Dow average year-to-date, Goldman rallied 7 percent last week along with the overall financial sector.

Intel (INTC) is expected to report EPS of $0.48 on revenues of $13.88 billion. On Wednesday, American Express (AXP) is due to report EPS of $1.35 and revenues of $8.08 billion. AXP and GS are the two worst performing Dow components in 2016, so good numbers this week could be a boost for the Dow, particularly GS since it is the second largest component. On Thursday, Microsoft (MSFT) and Visa (V) are scheduled to report. While consensus estimates for MSFT are for EPS of $0.64 on revenues of $22.11 billion, investors expect Visa to report EPS of $0.67 and revenues of $3.6 billion.

Other blue chips or widely held shares reporting include: Netflix (NFLX), Pepsi (PEP), Harley-Davidson (HDI), Johnson & Johnson (JNJ), Philip Morris International (PM), Yahoo (YHOO), UnitedHealth Group (UNH), Abbott Labs (ABT), Coca-Cola (KO), Yum Brands (YUM), Alphabet (GOOG), Biogen (BIIB), General Motors (GM), Schlumberger (SLB), Starbucks (SBUX), Verizon (VZ) and McDonald’s (MCD).

Financials reporting this week include M&T Bank (MBT), Pinnacle Financial Partners (PNFP), Comeria (CMA), Discover Financial Services (DFS), Northern Trust (NTRS), BB&T Corporation (BBT), Citizens Financial Group (CFG), Fifth Third Bancorp (FITB) and Synchrony (SYF).

The transportation and industrial sectors will also see several key reports including Union Pacific (UNP), Norfolk Southern (NSC), Southwest Airlines (LUV) and American Airlines (AAL). Industrials reporting include Johnson Controls (JCI), Honeywell (HON), Illinois Tool Works (ITW), Caterpillar (CAT) and General Electric (GE).

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