Equity markets made progress this week on better than lower expected earnings from some big names, including Caterpillar, Microsoft, Morgan Stanley, Google, Amazon.com and IBM. Some buttonwoodproject candidates were also in the positive surprise camp, namely: Verizon, Kimberly-Clark, Harris Corp., Dow Chemical, Danaher, Newmont Mining and QUALCOMM, but 3M Co. and DuPont, not so much and QUALCOMM guided lower. In all, the Dow Industrials rose 1.4% and both the S&P 500 and the NASDAQ (after fifteen years) reached new all-time highs gaining 1.8% and 3.3%, respectively. Energy stocks were flat on the week, but all other sectors were positive led by technology and telecom. Oil managed another $1.50 advance at $57.15/bbl., but gold retreated by nearly $28/oz. With these gains, the “C” word is again making headlines with more and more pundits calling for a correction, which has been overdue since the end of 2012 on a pure technical basis. But with few investment alternatives, resilient equities have been the place to be. Depending on one’s time horizon, the risks may be greater to be overweighted in cash right now, but there may be better entry points for stocks down the road, especially in the tech sector. But enough guessing. Traders will continue to be distracted with reports of sluggish growth, strong-dollar earnings weakness, global tensions, softness in housing numbers and the eventual interest rate hike date, so we all need to adjust to continued volatility. In the week ahead we will get results from United Parcel Service with a first quarter Street estimate of $1.09 vs. $0.98. Gilead Sciences ($2.31 vs. $1.48) and Colgate-Palmolive ($0.66 vs. $0.68) report on Thursday and Friday we will see how well CVS Health did for its first quarter of 2015, with an expected $1.08 per share vs. $1.02 a year ago.
Here is the answer to last week’s trivia question: What was the largest single day percentage loss for the Dow Jones Industrial Average? 22.6%, 19.7% or 16.9%? Answer: 22.6%, when the average dropped 508 points on October 19, 1987, on what has been referred to as “Black Monday”. A reversal of that magnitude today would see a one day loss in the Dow of 4,088 points. Now that’s a correction.
Today’s Trivia Question: What do these product brands have in common: Murphy’s Oil Soap, Tom’s of Maine and Hill’s Science Diet Pet Food?