Wall Street managed to gain some ground last week with the S&P 500 moving higher by 1.4%, but still behind nearly 7% year-to-date. The Dow, weighted more with large industrial and commodity stocks, gained half as much despite falling over 500 points on Thursday, before clawing its way back with a 211 point advance on Friday. The NASDAQ moved higher by 2.3%, as technology stocks had a good week. With the exception of financials, all market sectors showed positive results led by telecommunications up 4.2%. Energy stocks gained 2% on average as oil prices moved higher on the new March contract settling at $32.19/bbl. after hitting a low of $28.35 on Wednesday.
An announcement by the European Central Bank suggested that it may provide more stimulus at its March meeting as inflation on the continent has weakened significantly. Here at home, the Fed is expected to hold interest rates steady on Wednesday, but its statement will be in focus for clues about the bank’s views on the economy. The likelihood of four rate hikes this year by the Federal Reserve appears to be less likely given the economic state of the world, which took bank stocks lower. The International Monetary Fund downgraded its outlook for the world economy to 3.4% from 3.6%, blaming weakness in developing nations. It also lowered its forecast for the U.S. by 0.2% from its October outlook.
The stock market is not rolling with the punches these days, as it had done for much of the bullish run. Of course, this may still be just a brief correction, and the market’s upturn could resume at any time. But for now, the good news is that the sharp drop in stocks has made valuations much more attractive. The rally on Friday, however, was more technical in nature with traders covering short positions and responding to a relief in falling oil prices. So volatility still remains center stage as equities adjust wildly to any economic news. The current earnings season is showing the impact of falling oil prices and the decelerating rate of growth in China, as a number of firms point to weakness in both areas to explain their struggles. Although earnings are coming in about as expected by beating lowered guidance, predictions are still falling short as companies lower investor expectations for the next few quarters. On Monday, income candidate Kimberly-Clark will report fourth quarter earnings estimated at $1.43 vs. $1.35 a year ago. 3M Co., Johnson & Johnson and Danaher will share results on Tuesday, followed by Colgate-Palmolive on Friday.
Here is the answer to last week’s trivia question: Who was the first African-American member of the NYSE? Joseph L. Searles III; Travers Bell, Jr.; Jack Roosevelt “Jackie” Robinson; or George Ellis Johnson, Sr. Answer: Joseph L. Searles III who became a member on February 12, 1970
Today’s Trivia Question: Many box-office observers suggest Walt Disney’s “Star Wars: The Force Awakens” will ultimately gross $2.2 billion to $2.4 billion worldwide. Disney inherited the Star Wars franchise with its purchase of? Pixar; DreamWorks SKG; Lucas Films; or Marvel Studios.