The holiday-shortened trading week was nothing to write home about. Stocks turned negative by one percent, with the Dow tumbling 139 points on Thursday (203 points for the week). Small and mid-cap stocks were taken back by about 1.5%. Virtually all market sectors were in the red, especially cyclical stocks in the basic materials and industrial groups. Transportation stocks lost 2.5%. And, despite decent results from some of the country’s major banks, financials also led the averages down. Safe-haven consumer staples, utilities and gold-related stocks were the only places to hide. The price of gold was up $31.60/oz. and fixed income instruments were higher.
Geopolitical tensions (Notably: Syria, North Korea and elections in France) were mostly to blame ahead of the long weekend. But continued delays in Washington to move ahead with initiatives on healthcare, taxes and deregulation were also on traders’ minds. The equity markets have drifted a bit lower since the beginning of April. This followed a modest decline in March, after a strong rally that began in early November of last year.
Looking ahead, first quarter earnings will be pouring in this week from portfolio choices Johnson & Johnson, CSX, Verizon, Danaher and Schlumberger. Challenges are clearly in sight for Wall Street, but the economy is mostly obliging and the Federal Reserve seems in no hurry to abandon its accommodating ways (especially after the weak March jobs report). If the earnings outlook stays its course and the tenuous global situations don’t worsen, the long-term direction for equities remains cautiously positive.
Here is the answer to last week’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. Answer: South Korea. The word “Hankook” itself resembles Korea in Korean (literally meaning Korean tires). The company recently announced that it will invest $1.1 billion to build a factory in Indonesia as part of a plan to become the world’s 5th largest tire manufacturer.
Today’s Trivia Question: Pennzoil, founded in Los Angeles, California in 1913, is now part of what company? Royal Dutch Shell, Ashland, BP or Exxon Mobil.