Market Perspective for May 6, 2016

Mixed employment and earnings data pulled stocks lower in early Friday trading, though all three indexes managed to close higher on the day.  For the week, the Dow Jones Industrial Average and the S&P 500 index were down approximately 1 percent. Profit-taking in Amazon (AMZN) and Apple’s slump led to a 0.84 percent pullback in the Nasdaq. The iShares MSCI EAFE ETF (EFA) was off slightly more than 2 percent after the U.S. dollar strengthened.

April’s ISM manufacturing index indicated continued expansion at 50.8. On Tuesday, automakers reported another month of strong light vehicle sales with more than 1.5 million units sold, an increase of 3.6 percent from the same period a year earlier.

The odds of a June interest rate hike dwindled to 4 percent following an ominous jobs report. According to the ADP unemployment report, the private sector created 156,000 jobs in April, less than the estimated 195,000.

Weekly unemployment claims reached 274,000 in April. Non-farm payrolls increased by only 160,000, but the unemployment rate remained constant at 5 percent and average wages rose 2.5 percent on an annualized basis.

Pfizer (PFE) beat its top- and bottom-line revenue expectations and its full year earnings forecast. Merck (MRK) missed expected revenues by 12 percent, but beat earnings estimates thanks to cost-cutting measures. Shares rallied on the news. Mylan (MYL) and Allergan (AGN) were among those down on Friday, pulling pharma down about 6 percent on the week.

On Tuesday, Duke Energy (DUK) reported earnings per share (EPS) of $1.01, which was 17 percent less than consensus estimates. The lower earnings were a result of mild weather and the sale of its Midwest power-generating unit to Dynegy last year. On Wednesday, Tesla Motors (TSLA) exceeded its earnings estimates. The company reported a loss of $0.57 per share, which was 58 percent higher than the same period a year ago. Tesla also indicated that it would meet its delivery quota of between 80,000 and 90,000 vehicles for 2016.

On Thursday, global online retailer Alibaba (BABA) beat expectations with a 39 percent increase in revenues. Shares bucked the downtrend in Chinese tech shares for the week. Oil and natural gas exploration and production company Chesapeake Energy (CHK) reported a loss of $0.10 per share on lower-than-expected revenues of $1.95 billion. Chesapeake expects to generate another $950 million in asset sales as the company strives to fix its balance sheet. Royal Dutch Shell reported a 58 percent drop in revenues due to lower crude prices.


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