Market Update: Friday, April 15, 2016

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  • Indexes flat as investors continue to weigh earnings. The major indexes opened and closed almost exactly where they ended the day prior, as market participants digested mixed earnings reports from bellwethers in the financial sector. Thursday’s trading saw no sector move more than 0.5% in either direction, with energy stocks up 0.4% despite a 0.6% slide in oil prices. Meanwhile, gold dropped 1.7% and the 10-year Treasury yield rose by 3 basis points to 1.79%. Final tallies: Dow +18.15 to 17926.43, Nasdaq -1.53 to 4945.89, S&P 500 +0.36 (+0.02%) to 2082.78.
  • Profit taking, oil push markets lower. U.S. equities are tracking European indexes lower this morning as traders take some risk off the table after a strong week for stocks and ahead of a meeting among major oil exporters to discuss a potential production freeze, which is also weighing on crude. China’s Q1 gross domestic product (GDP) figures met expectations at 6.7%, but failed to help the Shanghai Composite move higher, while other regional indexes finished mixed. Elsewhere, gold is up, as are Treasuries, with yields lower across the curve.

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  • April Empire State Manufacturing Index exceeds very low expectations amid more signs of stabilization in manufacturing. The Empire State Manufacturing Index rose to +10 in April 2016 from +1 in March 2016. The +10 reading in April was above expectations (+2) and was the highest reading in 15 months (January 2015). The overall Empire State Manufacturing Index was in decline from mid-2014 through early 2016, as lower oil prices, weak overseas demand, and a stronger dollar have weighed on the index. With oil stabilizing and the dollar’s headwind abating somewhat, manufacturing appears to be finding a firmer footing. Although this report is timely (it is the first look at April manufacturing activity), it is narrow in scope, and in recent years it has not been a good indicator of trends in manufacturing activity nationwide.
  • OPEC “freeze” meeting, housing, FOMC quiet period, and Q1 GDP next week. Sunday night into Monday, markets will be focused on the OPEC meeting in Doha, as members discuss a possible production freeze. Back in the U.S., key reports on Q1 GDP, leading indicators, durable goods orders and shipments for March, and the Employment Cost Index for Q1 will all come out next week, along with March reports on home sales and housing starts. After a flurry of Federal Reserve Bank (Fed) speakers early in the week, the Fed will go into “quiet period” mode ahead of the April 26-27 Federal Open Market Committee (FOMC) meeting. Overseas next week, focus will be on the European Central Bank meeting on April 19, as well as the Markit Purchasing Managers’ Index (PMI) manufacturing data for the Eurozone and Japan, due out next Friday, April 22.
  • China released official GDP statistics overnight. To the surprise of no one, the official data came in at 6.7% growth, down from 6.8% in the previous quarter. Though official Chinese data are considered suspect, there are aspects that can be independently verified that show economic improvement. These include upticks in things like electricity generation, real estate construction activity, commodity imports, and similar measures. Taken together, these factors suggest stabilization in the “old economy” aspects of China and modest growth in Chinese services. Real GDP growth is probably closer to 4% than the official numbers, a gap that has persisted since 2014.
  • The S&P 500 took yesterday off. Yesterday the S&P 500 gained 0.02%, for the flattest day since early March. Even more interesting is it traded in a range of only 0.47%, which was the smallest range we’ve seen so far this year. With one day to go, the S&P 500 is up 1.7% for the week; should it finish this week in the green, that would mark five consecutive weeks of alternating gains and losses. Today is April 15 (tax day) and interestingly, this day has only been down once since 2006 for the S&P 500. Of course, this year your taxes aren’t due today and you have an extra few days to file, which we explained in this blog post.
  • Sentiment remains subdued. With the S&P 500 less than 3% away from an all-time high, overall sentiment remains rather neutral. The American Association of Individual Investors (AAII) sentiment survey has the highest number of neutral voters (47%) so far this year. In fact, the bulls actually dropped last week from 32% to 28%. Going back to 1987, the long-term average for the bulls has been 38%. Surprisingly, the bull readings have been beneath this long-term average for 23 consecutive weeks.

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Friday:

  • Empire State Manufacturing Index (Apr)
  • Consumer Sentiment and Inflation Expectations (H1 Apr)
  • IMF and World Bank hold their spring meetings in Washington, DC
  • Official campaign for UK’s EU referendum begins (Vote on June 23, 2016)

Sunday:

China: Property Price Indexes (Mar)

 

Click Here for our detailed Weekly Economic Calendar

 

Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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