Market dances to earnings beat

04/15/19
  • Friday’s initial bank earnings surprised to the upside
  • Tech index reached 20% YTD return
  • This week: Earnings dominate holiday-shortened week

The waiting, as one Thomas Earl Petty once sang, is the hardest part.

Last week had its share. Anticipation of the release of FOMC minutes on Wednesday, and the first batch of big bank earnings on Friday, made for some relatively quiet trading sessions. But patient bulls got their reward: Before the closing bell rang on Friday, the S&P 500 (SPX) had pushed to within 1% of its all-time high—its highest level since October 4.

S&P 500 (SPX), 9/13/18–4/12/19. S&P 500 (SPX) price chart. 1% away.

Source: Power E*TRADE


Better-than-expected quarterly numbers from JPMorgan Chase (JPM) and Wells Fargo (WFC)—plus upbeat economic news out of China and a big oil-sector deal1—helped energize the market Friday after a week of mostly sideways trading. The only bearish hiccup occurred on Tuesday when the White House threatened tariffs against the European Union. 2

The FOMC minutes revealed some internal debate regarding what the Fed would do depending on the economy’s trajectory, but at the end of the day a majority of the committee believed it was likely rates would remain unchanged for the rest of 2019.3

Although the week’s gains were modest, it rounded out a dozen up weeks out of 15 this year for the SPX, and 14 out of 15 for the Nasdaq 100 (NDX), which pushed its year-to-date (YTD) gain above 20%:

US stock index performance table for week ending 4/12/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector breakdown: The top-performing S&P 500 sectors last week were financials (+2.1%), communications services (+1.5%), and information technology (+1.1%). The worst-performing sectors were health care (-2.5%), energy (-0.3%), and utilities (+0.2%).

Power Moves: Global Brass and Copper Holdings (BRSS) jumped 25% on Wednesday. On the downside, Hollysys Automation Technologies (HOLI) and Zogenix (ZGNX) both shed 23% on Tuesday.

One of the biggest moves, though, came on Friday, when shareholders of Andarko Petroleum (APC) woke up to a 32% gain on news Chevron (CVX) was acquiring it in a $33 billion deal. That overshadowed Disney’s (DIS) 12% intraday jump following the announcement of its Disney+ streaming service.

And one other move that wasn’t nearly as big, but still notable: Website design software maker WIX (WIX) jumped more than 3% intraday to a new record high on Friday (see “Stock coils like a snake, options traders strike”).

The week’s three IPOs—Tufin Software Technologies (TUFN), PagerDuty (PD), and Jumia (JMIA)—all got off to hots starts, each jumping 25% or more on their first days.

Futures action: After rallying as high as $64.71/barrel on Wednesday, June WTI crude oil (CLM9) drifted mostly sideways to close Friday around $64. June gold (GCM9) rallied close to $1,315/ounce last Wednesday before dropping around 1.4% on Thursday and closing the week around $1.294.

Coming this week

Thursday is April options expiration, and the week features a steady stream of housing, manufacturing, and sales data:                                                                                  

Monday: Empire State Manufacturing Survey (8:30 a.m.), RBA Meeting Minutes (9:30 p.m.)

Tuesday: Industrial Production (9:15 a.m.), Housing Market Index (10 a.m.); China GDP, Industrial Production, and Retail Sales (10 p.m.)

Wednesday: International Trade (8:30 a.m.), Wholesale Trade (10 a.m.), Beige Book (2 p.m.)

Thursday: April equity options expiration, Retail Sales (8:30 a.m.), Business Inventories (10 a.m.), Leading Indicators (10 a.m.)

Friday: Good Friday, housing Starts (8:30 a.m.)

Don’t forget this is a shortened weekmarkets will be closed (or have limited trading) on Good Friday.

Although today will be relatively quiet on the earnings front—Goldman Sachs (GS) and Citigroup (C) follow up on Friday’s bank reveal—the pace picks up dramatically tomorrow and continues through the rest of the week. A few highlights:                              

Monday: Aphria (APHA), Citigroup (C), Goldman Sachs (GS)

●Tuesday: Bank of America (BAC), Comerica (CMA), First Horizon (FHN), Johnson & Johnson (JNJ), Omnicom (OMC), PacWest Bancorp (PACW), Pentair (PNR), Progressive (PGR), Prologis (PLD), UnitedHealth (UNH), CSX (CSX), IBM (IBM), Netflix (NFLX), United Continental (UAL)           

●Wednesday: Abbott Labs (ABT), BNY Mellon (BK), Morgan Stanley (MS), PepsiCo (PEP), U.S. Bancorp (USB), Alcoa (AA), Atlassian (TEAM), Kinder Morgan (KMI), Sallie Mae (SLM), United Rentals (URI)       

●Thursday: Ally Financial (ALLY), American Express (AXP), BB&T (BBT), Blackstone (BX), Check Point Software (CHKP), Citizens Financial Group (CFG), Danaher (DHR), Honeywell (HON), KeyCorp (KEY), Philip Morris (PM), Schlumberger (SLB), SunTrust Banks (STI), Taiwan Semi (TSM), Union Pacific (UNP)

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule, along with a complete list of splits, dividends, IPOs, economic reports, and other market events. The Active Trader Commentary also lists earnings announcements and economic report times every morning.

Word on the Street

[T]he evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.

From the minutes of the Federal Reserve’s March 19–20 FOMC meeting.4

Market has shown some spring in its step. Stocks have not abandoned their record pace in the first couple of weeks following the Q1 uber rally: The SPX’s 15.98% YTD gain is bigger than it’s been at the same point in all but two years (1975 and 1987) since 1950.

Market Easter eggs. The four-day week leading up to Easter has been something of a mixed basket for the US stock market since 1997. Monday (today) and Thursday were up days more often than not, while Tuesday and Wednesday were more likely to be down days. The days with the strongest tendencies were Wednesday (down 14 of 21 years) and Thursday (up 15 of 21 years).

 

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1 Bloomberg.com. S&P 500 Nears Record on Bank Earnings; Bonds Fall: Markets Wrap. 4/12/19.

2 MarketWatch.com. S&P 500 on course to snap 8-day winning streak after Trump tariff threat. 4/9/19.

3 CNBC.com. Fed officials are leaving the door open for more rate hikes if the economy improves, minutes say. 4/10/19.

4 FederalReserve.gov. Minutes of the Federal Open Market Committee, March 19-20, 2019. 4/10/19.

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