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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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The Week In Review

4/22/16

The stock market ended a mixed week on a wobbly note as disappointing earnings results from the likes of Alphabet (GOOG 718.77, -40.37) and Microsoft (MSFT 51.78, -4.00) weighed on the technology (-1.9%) sector. The major averages ended off their lows as crude oil extended its recent rally and the heavyweight financial sector (+1.0%) outperformed. The Nasdaq Composite lost 0.8%, ending the week lower by 0.7% while the S&P 500 (UNCH) locked in a weekly gain of 0.5%.

 

Equity indices spent the bulk of their trading day in negative territory, pressured by heavily-weighted technology (-1.9%) and consumer discretionary (-0.3%). The two sectors traded behind the market for the entire session and helped waylay a larger rebound attempt. For its part, crude oil added support to the broader market as the energy component finished the day higher by 1.4% ($43.77/bbl).

 

The major averages would carve out new session lows in the late morning, spurred on by growing losses in the heavyweight health care space (+0.2%). However, the broader market would stage a recovery in the afternoon, as eight sectors extended their gains. By the end of the session, energy (+1.3%), financials (+1.0%), utilities (+0.9%), and telecom services (+0.8%) topped the leaderboard. Meanwhile, technology (-1.9%) and consumer discretionary (-0.3%) finished with the only losses.

 

In the technology space (-1.9%), Alphabet (GOOG 718.77, -40.37) fell 5.3% after it disappointed investors with a bottom-line miss in the first quarter. Particularly, participants focused on rising investments in its mobile search platform and increasing traffic acquisition costs. Meanwhile, Microsoft (MSFT 51.78, -4.00) fell 7.2% as slowing consumer PC sales and weaker than expected fourth-quarter revenue guidance preyed on investor confidence. The broader sector trimmed its 2016 gain to 0.2%.

 

The consumer discretionary space (-0.3%) also suffered from some unsatisfactory quarterly results as large cap Starbucks (SBUX 57.68, -2.96) fell 4.9% after missing comparable store sales growth forecasts. The coffee chain did report in-line results for the first quarter though. Elsewhere, Dow component McDonald's (MCD 125.50, -0.29) ended its session lower despite reporting top-and-bottom-line results that came in above analysts' estimates. The company saw global comparable sales rise 6.2%, which was also above estimates.

 

In the energy space (+1.3%), independent oil and gas companies outperformed as crude oil extended its weekly gain to 8.3%. On the flipside, oilfield service name Schlumberger (SLB 79.93, -0.34) underperformed the sector as participants weighed falling global activity against largely in-line results. Schlumberger noted that total North American revenue fell 25.0%, while its U.S. land rig count declined by 31.0%.

 

The financial sector (+1.0%) extended its weekly gain to 2.8% as better than expected results from E*TRADE (ETFC 26.14, +0.80) and SunTrust Banks (STI 41.96, +2.09) capped off a strong week.

 

On the currency front, the U.S. Dollar Index (95.11, +0.51) ended its day broadly higher as the yen and euro weakened against the greenback. The dollar/yen pair jumped 2.0% (111.63) after comments from Japanese officials alluded to the possibility that the Bank of Japan may apply negative interest rates to bank loans. For its part, the euro/dollar pair fell 0.6% to 1.1226.

 

Treasuries ended the day lower with the yield on the 10-yr note rising two basis points to 1.88%. This represents a 13-basis point gain from last Friday's settlement at 1.75%.

 

Today's trading volume was strong with more than one billion shares changing hands at the NYSE floor.

 

There was no economic data of note released today.

 

Monday's economic data will be limited to March New Home Sales (Briefing.com consensus 521k), which will cross the wires at 10:00 ET.

 

Dow Jones +3.3% YTD

S&P 500 +2.3% YTD

Russell 2000 +0.8% YTD

Nasdaq Composite -2.0% YTD

Week in Review: S&P 500 Continues Higher While Nasdaq Lags

 

The past week saw the S&P 500 notch a fresh high for the year before registering its second consecutive weekly gain. The benchmark index added 0.5% for the week while the Nasdaq underperformed, shedding 0.7%.

 

Investors did not receive any market-moving data during the past week, which kept the Atlanta Fed's GDPNow forecast for the first quarter unchanged at 0.3%. The advance estimate of first-quarter GDP will be reported on Thursday at 8:30 ET, a day after the Federal Open Market Committee announces its latest policy decision.

 

The Fed meeting will be the highlight of next week, but the fed funds futures market remains convinced that there is just a 1.0% chance of a rate hike being announced on Wednesday.

 

Investors received the first heavy batch of first-quarter earnings during the past week and the results have been mixed relative to lowered expectations. Disappointing results from Alphabet (GOOG) and Microsoft (MSFT) kept the Nasdaq behind the S&P 500 while economically-sensitive rail carriers like Union Pacific (UNP) and Norfolk Southern (NSC) topped market expectations, masking year-over-year declines in revenue.

 

The advance in stocks was accompanied by some selling in the Treasury market that sent the benchmark 10-yr yield to 1.88% from the previous week's settlement at 1.75%.