This past week was the definition of “consolidation” – a period of very little movement and volatility after a large move up to work off overbought conditions. A slight gap up Tuesday was about it in terms of excitement for the week. Bulls remain in full control.
We are in the midst of earnings season – it is not a great one but companies have lowered the bar enough that they will “beat”, everyone will clap and cheer, and we continue on.
The first-quarter earnings outlook has improved somewhat, according to CFRA, which said consensus estimates now call for a 2.3% fall in first-quarter operating earnings a share. That is up from the call for a 3% drop ahead of the kickoff of earnings season, but down from the 4.5% increase projected at the end of last year
“The market is completely focused on earnings,” said Eric Kuby, chief investment officer for North Star Investment Management. “Companies really lowered their guidance coming into earnings season, and we’re getting to the point where companies are doing a good job of stepping over that lowered bar.”
“It’s still much too small a sample size to generate conclusions, but the bottom line is that earnings season is not off to a very good start,” wrote Tom Essaye, president of the Sevens Report in a research note. “While stocks are looking past that courtesy of dovish Fed speak and hopes of better global growth, earnings will need to get better during the next two weeks—because so far the results, while not a disaster, aren’t that great.”
Not much on the economic front that the market cared about. Here is some data regarding the Fed’s Beige Book:
Most of the 12 districts monitored by the Fed showed economic activity grew at a “slight-to-moderate” pace in March and early April, according to the central bank’s Beige Book compilation. However, retail and automobile sales were sluggish while the labor market remained tight, increasing upward pressure on wages, indicating conflicting views on the economy depending on the sector.
Retail sales also came out Thursday to the tune of a rise of 1.6% in March, beating consensus estimates. The increase was driven by a 3.5% rise in auto sales, but even with autos and gas stripped out, sales rose by 0.9%, after February’s 0.4% decline.
For the week, the S&P 500 fell 0.1% while the NASDAQ gained 0.2%.Continue reading