Despite a late-week rally in oil prices, equity markets failed to continue its first quarter recovery this week and shed about 1.2% in value. The market was due for a breather with a potentially weak first-quarter earnings season looming around the corner. With crude prices closing out the week at nearly $40/bbl., energy and oil service equipment stocks were the star performers with a 2% gain for the sector. Healthcare made a modest move upward, but all other market sectors were in negative territory for the week. Financial stocks were particularly hard hit with the likelihood of interest rate relief for banks looking to be further out on the horizon. Global growth concerns raised its ugly head once again, especially in Japan after the Bank of Japan pushed short-term interest rates into negative territory, but the yen unexpectedly rose, which baffled investors.
The Treasury Department put the kibosh on the Pfizer-Allergan deal, calling it a tax dodge and the Justice Department filed a law suit in an effort to block the combination of Halliburton and Baker Hughes. A slowdown in merger and acquisition activity shed some additional gloom on the financial sector, which took 2.6% hit this week. Market volatility is also back as we saw on Friday with large early gains subsiding to eke out only a modest advance. Tuesday and Thursday were the weakest of the five trading sessions with the Dow Industrials falling 134 points and 174 points, respectively; although volume wasn’t particularly robust. Traders decided to take some profits before what could be a rough few weeks for stocks as peaked first quarter earnings and potential of lackluster full-year guidance expectations may not all be priced in.
Alcoa will kick-off earning’s season after the close on Monday with the prospects of a bit-better than a break-even quarter vs. $0.28 a year ago. On Tuesday, rail and inter-modal carrier CSX will report earnings estimated at $0.37 per share vs. $0.45 last year, with declining coal shipments providing most of the headwind. JPMorgan Chase reports later in the week ($1.27 vs. $1.45), along with other big banks. The bull market is showing its age, but the prevailing view is still positive for stocks. The lackluster economic outlook should keep the Fed at bay from aggressive tightening for a while, which is conducive to rising equity prices in the short run. Nonetheless, stocks can only move substantially higher if the economy grows – both here and abroad – and sales and earnings follow suit.
Here is the answer to last week’s trivia question: Which major U.S. rail recently moved its listing from the New York Stock Exchange to the NASDAQ? Norfolk Southern, CSX Corp, Kansas City Southern or Union Pacific. Answer: Aggressive portfolio candidate CSX Corp. moved to the NASDAQ after the close of trading on December 21, 2015 retaining its namesake ticker symbol – CSX.
Today’s Trivia Question: Who owns The Washington Post? Jeff Bezos, Warren Buffett, Karl Icahn or Rupert Murdoch.