Nowhere to go but up? Equities continued their upward momentum on Friday, spurred by some good earnings and some surprisingly good economic figures. Stocks bounced around during the session, the last trading day of an abridged low volume week, but fundamentals won the day resulting in a positive close for equities.
WHAT YOU NEED TO KNOW:
1) Politics is politics and the markets are leaving it up to the politicians. Despite the release of the long-awatied Mueller report and AG William Barr’s eyebrow-raising press release hitting on Friday, traders seemed to shrug off the likely fallout from the release’s contents. Though there are many implications that arise from the investigation, traders seem to be focused on re-finding 2018’s highs putting off judgement until congress and voters weigh in. More to come in the week ahead as the fallout continues to unfold.
2) Party like it’s 1999. On Thursday, two tech unicorns sold public shares for the first time and investors couldn’t get enough of them. Well-known picture-based social media company Pinterest and completely-unknown Zoom Video made initial public offerings on Thursday. Pinterest closed up +28.42% over its offer price and Zoom closed up +72.22% at $62 after being priced at $36. Even Zoom’s CEO seemed somewhat surprised at his stock’s closing price on Thursday. Perhaps that’s because he was not around during the dot-com bubble that ended with a bang in March 2000 after which the NASDAQ Composite Index began the -74% retreat that ensued in the two years that followed. Pinterest is not profitable and Zoom Video earned $7.6 million on the the $330 million in revenues it collected in the trailing 12 months. So maybe profitability, pays, even for unicorns.
3) Jobs are aplenty! According to the weekly first time claims for unemployment numbers released by the Department of Labor on Thursday, 192k new claims were filed in the prior week. The lowest number in 50 years!
4) Retail sales posted a solid! According to Thursday’s Census Bureau release, Retail Sales surged by +1.6% month over month beating expectations. The release is a positive sign for the economy and will certainly up the ante for this upcoming Friday’s GDP release.
Unsure traders gave way to the secular, upward trend on Friday in a day chock-full of information. Despite at least one financial news channel’s overt attempts to avoid over-covering the release of the Mueller report, the release still overshadowed a net positive day of news for risk assets (AKA Equities). Industrials led the way higher as we received solid earnings releases from the likes of Snap On, United Rentals and Honeywell, amongst others. A stronger than expected Retail Sales figure along with a record weekly unemployment number kept the bulls focused despite the political distractions coming from DC. Stocks closed mixed, but mostly positive with the S&P500 climbing by +0.16%, the Dow Jones Industrial Average trading up by +0.42, the Russell 2000 slipping by -0.12% (now below its 200 day moving average trend line), and the NASDAQ 100 adding +0.12%. Bonds traded up and the 10 year treasuries slipped by -3 basis points to close at 2.56% and the 3 month / 10 year yield curve closed out the week at +14.
WHAT TO LOOK FOR TODAY:
This morning we will get month over month New Home Sales from the US Census Bureau which is forecast to have fallen by -3.8% after growing by 11.8% the month prior. Whirlpool, Halliburton, Kimberly Clark, and Lennox are amongst the companies announcing earnings before the open. The Mueller Report along with the eclectic talkshow lineup from the weekend will take center stage tomorrow, though the report should not have an impact on the markets.
WHAT TO LOOK FOR IN THE WEEK AHEAD:
The week ahead will include housing numbers, Durable Goods Orders and the University of Michigan Sentiment Index, though the most anticipated release is the first estimate of 1Q GDP, which is expected to come in at +2.2% flat from last month’s figure. The expected GDP figure comes from a pretty broad spectrum of estimates so this one could go either way and it will be closely watched. Earnings will most likely take center stage this week with no fewer than 143 S&P 500 companies scheduled to deliver their 1Q results. Beyond this morning expect to hear from Twitter, Coca-Cola, Harley-Davidson (which is smack in the middle of the trade war), Texas Instruments, United Technologies, Hasbro, Nucor, P&G, eBay, Snap, Biogen, Boeing, Caterpillar, Chipotle, Facebook, Tesla, Visa, Bristol-Myers Squibb, Freeport-McMoran, Intel, Mattel, Amazon, Chevron, Exxon Mobile, ADM, and Goodyear Tire & Rubber. As you can see earnings cover the full spectrum of sectors/industries including materials, chips, energy, consumer discretionary, and FAANGS (though not technically a sector), to name just a few. Refer to the attached weekly economic and earnings release calendar for details.