Wall Street ended April on a sour note declining 1.3% on the week. The Dow Industrials managed only a 58-point gain for the month after reaching a multi-year high in mid-April and the S&P 500 was virtually flat for the month. Hardest hit this week was the technology and biotech-heavy NASDAQ retreating 2.7%. Needless-to-say, tech and healthcare were the two worst performers over the past five trading sessions falling 3.8% and 3%, respectively. Some of the culprits were Apple retreating 11% and Alphabet (aka Google), Microsoft and Gilead Sciences in the biotechnology space were no help. Facebook, however, kept the NASDAQ 100 Index from falling off the cliff advancing 6% to a record high following its earning’s news and Amazon.com had a similar showing, as well. As was last week, market sectors were split down the middle led by utilities, positive by 2.3%, and to some extent telecom and energy. Crude oil managed another weekly gain closing in on $46/bbl. And gold was particularly strong up 5% from last Friday, settling at $1,289/oz.
The primary market offenders this week were twofold: The Bank of Japan failed to raise stimulus that spooked global equities and a return of new indications of slowing growth here at home. For the first quarter, the seasonally adjusted GDP rose just 0.5% – the worst showing in two years. Central banks are running out of options. The Federal Reserve passed on an interest rate hike and gave no clues for when it feels a move up may be in order. Earnings, as bad as they were, came in a bit better than expected, but sales remained week, especially for the multi-nationals and oil and gas giants. Standard & Poor’s stripped ExxonMobil of its triple-A rating which it held for more than sixty years citing a weak picture for energy and its effects on Exxon’s balance sheet. That leaves just two companies remaining with the prestigious debt rating: Microsoft and Johnson & Johnson.
CVS Health will report earnings on Tuesday and analysts are looking for a two-cent per share gain vs. last year to $1.16. Otherwise a dearth of economic news will keep traders at bay until the next wave of significant reports start to roll in. The recovery in energy and other commodity prices are keeping a floor on stocks for now, but only strong global growth will keep these prices from retreating once again. Long-standing resilience in housing, a further strengthening in the job market, some firming at the retail counter and decent levels of consumer confidence all should help to generate some strengthening in growth – to perhaps 2.0%-2.5% – in the second quarter. The ability for markets to stay relatively strong on generally uninspiring economic news is encouraging, but earnings will need to move upward to keep valuations in check.
Here is the answer to last week’s trivia question; The International Monetary Fund (IMF) is part of? The United Nations, The G-7, The World Bank or the Federal Reserve. Answer: Headquartered in Washington DC, the IMF, working to foster global monetary cooperation, secure financial stability, facilitate international trade, among other financial incentives, is part of the United Nations.
Today’s Trivia Question: J.M. Smucker purchased its highly sought after Jiff Peanut Butter brand from Procter & Gamble in 2001 for $813 million in stock. What other product from P&G came along for the ride? Pringles, Crisco, Sunny Delight or Folgers Coffee.