The Dow Industrials moved lower by seven points for the week, in an otherwise lackluster market. Strong gains on Wednesday disappeared after the March minutes from the Federal Open Market Committee indicated that the central bank is considering reducing its $4.5 trillion stockpile of government and mortgage-backed bonds later this year. Together with House Speaker Paul Ryan playing down the pace of tax cuts, disappointing auto sales for March and tensions bubbling in the mid-East, bidders stayed on the sidelines. The S&P 500 lost 0.3%, the NASDAQ nearly twice that and small cap stocks particularly hard it with a 2% decline, on average. While energy stocks moved ahead on a 3% pop in oil prices, most sectors ended the week in negative territory.
Meanwhile, earnings season is upon us once again, and the expectations are high, with projected increases for the first quarter being the most in more than half a decade. The outlook for the next few quarters appears positive as well thanks to a better economy and solid cost controls. I also think the good news will continue throughout 2017, with a possible late assist from lower corporate taxes and deregulation, if Administration-led efforts ultimately prevail. However, equities are always vulnerable to sudden global chaos, remarks from Federal Reserve officials and economic reports that are less than spot-on.
As mentioned, earnings will begin to trickle in this week as we first hear from some of the nation’s major banks including JPMorgan Chase, Citigroup, PNC Financial and Wells Fargo – all reporting on Thursday. Aggressive choice Chase is expected to show a profit of $1.52 per share vs. $1.35 a year ago. For now, the bulls have been buying on dips providing some resilience to an otherwise high-value market. Any earnings disappointments and watered-down guidance, however, will cause not only individual stock volatility, but may also spill over to the entire sector if not the market as a whole.
Here is the answer to last week’s trivia question: Bond guru Bill Gross recently settled a breach-of-contract dispute with PIMCO, the company he co-founded in 1971. Gross now runs a similar fund to the PIMCO Total Return Fund he managed for which new company? Dreyfus/Bank of New York Mellon, Vanguard Group, Janus Funds or Putnam Investments. Answer: Janus Funds
Today’s Trivia Question: Hankook Tire, the seventh largest auto and truck tire producer in the world, is a product of what country? United States, Japan, United Kingdom or South Korea.