First quarter earnings’ season is well underway, and so far there has been better results (than forecast) vs. poorer ones. Stocks were able to rally on news out of China, namely the economy is “stabilizing”. Most averages pointed up nearly 2% for the week and equities are waffling between year-to-date gains and losses. The S&P 500 closed on Friday with a 1.8% year-to-date gain, but still in the red for the past twelve months by 1.2%. The Dow Industrials have performed a bit better with a gain of 2.7% so far this year. Oil prices have been less of a drag on equities now that they have leveled off somewhat at about $40/bbl. GDP growth, which is estimated to be up about 1% for the quarter, looks to be trending higher and a 2% pop in the second quarter is likely.
For the week, telecommunication stocks were the sole laggard, while all other market sectors were higher led by basic materials and financials. Better news out of JPMorgan Chase provided some tailwinds to the banking sector as lower profits were not as bad as expected and JPM rose $4.13 for the week or 7%. Rails and truckers were also in vogue adding over 3% to the Dow Transportation Average. Here, CSX’s results were decent given its exposure to coal and other commodities, lifting the stock higher by 4.5%. Looking ahead, we will get results from Intel on Tuesday along with Johnson & Johnson. Both of which should show better per share earnings than a year ago, but guidance for the remainder of the year will be key. Newmont Mining reports first quarter earnings on Wednesday and is not expected to have earned more than $0.20 per share vs. $0.46 last year. Also this week Verizon Communications, Danaher, Schlumberger, LyondellBasell and Kimberly-Clark will report results.
An accommodative Federal Reserve, moderate sustained growth and upbeat earnings will be the focus for traders over the next few weeks, but the case for the bulls remains intact. Results of an OPEC meeting in Qatar have not been finalized as of this writing and the lack of an agreement to curtail output may rattle energy prices and spill over to equities. Other challenges still lie ahead and the November election is indeed a wild-card, but longer-term investors are best served with equities over alternatives.
Here is the answer to last week’s trivia question: Who owns The Washington Post? Jeff Bezos, Warren Buffett, Karl Icahn or Rupert Murdoch. Answer: On August 5, 2013, Jeff Bezos announced his purchase of The Washington Post for $250 million in cash from publicly held Washington Post Co. The Washington Post Co. changed its name to Graham Holdings and retained its other media and educational businesses.
Today’s Trivia Question: Petroleum jelly and other skin care products sold under the Vaseline name, was once owned by? Eastman Kodak, General Tire & Rubber, J.M. Smucker’s or Standard Oil Company?