A “relief rally” (gap up style) occurred Monday after the French Election showed centrist Macron to be the most likely winner in the final vote in May, helped indexes push to higher ground for the week.
A poll from Ipsos/Sopra Steria showed Macron leading Le Pen head to head, 62% to 38%. Conservative François Fillon and Socialist Benoît Hamon — the mainstream candidates defeated in the first round — both threw their support behind Macron. Their support is seen as fending off nationalist Le Pen, who has called for scrapping the euro and exiting the European Union, a prospect seen as hugely destabilizing for the region.
There was a smaller version of that gap up Tuesday on positive earnings pre market from the likes of Caterpillar and McDonald’s. The rest of the week was relatively quiet despite the unleashing of the Trump tax “plan” (i.e. many bullet points on 1 sheet of paper). For the week the S&P 500 finished up 1.5% and the NASDAQ 2.3%.
On the economic front, U.S. house prices continued to show no signs of slowing, hitting their highest level in nearly three years as demand remained hot. Meanwhile, sales of newly-constructed homes rose to the highest in nearly a year in March as the housing recovery picked up steam.
A first reading on U.S. economic growth in the first quarter at a 0.7% rate was below forecasts, but market reaction to the report was muted.
No surprises Thursday from the central bank front – spigots on full:
The European Central Bank, as expected, made no changes to interest rates Thursday and repeated that it could increase the size or lengthen the duration of its asset-buying program if inflation looks set to fall far back below its target of near but just below 2%. The Bank of Japan, as expected, left its ultra-accommodative monetary policy unchanged and offered a more upbeat tone on the country’s economy.
We made our own 5 day weekly “intraday” chart of the S&P 500!
Marissa Meyer of Yahoo did little to change the fortune of the company in her 5 years at the helm. That said she is walking away with a $186M payout by selling the assets to Verizon. Just part and parcel with how the compensation system of the C-class executive is not really that aligned very much with performance.
San Francisco is apparently not the most expensive place to live in the U.S. based on average incomes – this place is.
The week ahead…
Earnings season will continue but we’re getting to the tail end of the S&P 500 and some smaller companies will now join in – that said Apple (Tue) and Facebook (Wed) will be the normal doozies.
The first week of the month brings the big economic data points so some to follow:
- Monday – ISM Manufacturing: 56.5 expected (down from 57.2 last month)
- Wednesday – ISM Non Manufacturing: 55.8 expected (up from 55.2 last month)
- Friday – Employment data – 190K jobs created and 4.5% unemployment rate (vs 98K jobs created last month and the same unemployment rate)
We also have a Federal Reserve meeting / announcement (Wednesday) which is expected to lead to nothing this time around.
The government kicked the can down the road for a week in terms of a government shutdown, so we’ll see if they do that again.
Short term: Last week we said there was some bifurcation among the 2 indexes with the S&P 500 under some resistance while the NASDAQ was looking stronger. This bifurcation continued this week with the NASDAQ still leading but both indexes obviously are in stronger shape than a week ago.
The Russell 2000 finally exited this multi month stay in “the yellow box” but returned into it Friday!
We took a short break from the NYSE McClellan Oscillator last week as it was giving us rapidly changing signals but things seem more sanguine now so we’ll return to it.
Long term: Here are 5 year charts on the major indexes; we are a broken record here but it would take a very severe selloff to change prospects here. Short term the NASDAQ is actually above the channel it has been trading in, since early 2016.
For the month the Nasdaq finished up 2.3%, representing its six straight monthly gain—the longest stretch of monthly gains since a seven-period ending in May 2013.
Charts of interest:
Shares of C.R. Bard (BCR) closed up nearly 20% Monday after Becton Dickinson & Co. said it would acquire the medical-supplies maker.
Tuesday, Caterpillar (CAT) lifted its full-year revenue outlook and reported better-than-expected results, sending shares up 7.9%.
Fast-food giant McDonald’s (MCD) gained 5.6% Tuesday after it served up first-quarter earnings that beat expectations.
Also on Tuesday, Netflix (NFLX) rallied 5.8% after reporting it struck a licensing deal with a Baidu subsidiary to start streaming original content into China.
Steel stocks had rallied the week prior to last on an announcement of a government probe on whether foreign steel imports are harming national security (i.e. a random way to inflict protectionism) but U.S. Steel (X) crumbled Wednesday, after the company reported a surprise quarterly loss.
The company reported late Tuesday an adjusted loss per share of 83 cents, compared with the consensus for a profit of 35 cents a share. Revenue of $2.73 billion also missed expectations of $2.95 billion.
Under Armour (UA) had been in the dumps since it’s last earnings report but Thursday soared 10% after the maker of athletic apparel reported a loss for the first quarter, but a loss that was smaller than expected.
Google (GOOG) surged Friday on earnings.
Have a great week and we’ll see you back here Sunday!