Earnings seasons is halfway over, and thus far, among the 240 S&P 500 firms that had reported as of last Friday, total revenues are up 3.7%, and earnings results are up 2.0% from the same period last year. Overall, while growth remains weak and fewer companies are beating revenue estimates, the general sentiment is: "not bad." Excluding the Finance sector (which is being dragged down by weak Bank of America results), revenue and earnings growth last quarter was in line with historical averages.
Why the volatile market performance last week? Investors already knew Q1 results would be weak, and those negative expectations were mostly priced into markets. However, markets are forward-looking and traders are more concerned about growth prospects going forward. The escalating tensions in Ukraine also weighed on investors, who are nervous about the potential effects of geopolitical issues on corporate profits. If Russia makes good on its threats to cut off natural gas supplies to Ukraine and Europe, general prices would probably go up, hurting consumer demand and economic growth in Europe. This could have serious implications for firms doing business overseas.
Economic data was a mixed bag last week. The number of Americans filing new unemployment claims rose more than expected last week, but economists think the increase is seasonal and doesn't suggest any fundamental shifts in the labor market. We'll have a clearer picture when the April jobs report comes out this Friday. Durable goods orders surged in March as businesses purchased long-lasting goods like household appliances, cars, and consumer electronics. An increase in this area generally means that retailers expect to be able to sell those products in the coming weeks and months. Consumer sentiment rose to a nine-month high in April as Americans became more optimistic about current and future economic prospects. Though consumer sentiment is known to be volatile, we can hope that improving job and business conditions will lead to greater consumer spending this quarter.
Investors will have a lot to digest in the week ahead with a Federal Open Market Committee (FOMC) policy meeting on Tuesday and Wednesday, the first Q1 Gross Domestic Product (GDP) estimate on Wednesday, and the April jobs report on Friday. Analysts don't expect the Fed to change interest rates or its QE tapering schedule, though Fed Chairman Janet Yellen might use her official speech as an opportunity to provide further guidance about interest rate plans.
Monday: Pending Home Sales Index, Dallas Fed Mfg Survey
Tuesday: S&P Case-Shiller HPI, Consumer Confidence
Wednesday: ADP Employment Report, GDP, Employment Cost Index, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday: Motor Vehicle Sales, Jobless Claims, Personal Income and Outlays, Janet Yellen Speaks 8:30 AM ET, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending
Friday: Employment Situation, Factory Orders
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Services sector slows expansion in April. The services sector, containing industries like financial services, hospitality, and healthcare, added jobs at the slowest rate in almost two years. Slow hiring could challenge the assertion that the job market is broadly improving.
Manufacturing sector expands in April. U.S. factory output growth increased at the fastest pace in three years, driven by domestic demand. On the other hand, inventories fell, indicating that future demand for factory products may fall.
Home sales suggest persistent weakness in housing market. New home sales dropped sharply in March, while sales of existing homes fell slightly for the third month in a row. Realtors blame rising mortgage rates and cold weather for plummeting sales, but some analysts think that housing prices have risen too high, putting ownership out of reach for many workers.
Chinese manufacturing activity remains weak. Though manufacturing sector activity rose in April, it remains below target growth, supporting other economic indicators that show China's economy may be stalling.
These are the views of 4th River Financial Group, and not necessarily those of the named representative, and should not be construed as investment advice. Neither the named representative nor the Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
- Yahoo! Finance
- http://online.wsj.com/news/articles/SB10001424052702304049904579518493992435028?mg=reno64- wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304049904579518493992435028.html