TradeTheNews.com Weekly
Market Update: Early Earnings Focus Fades in Face of Rising Rates
Fri, 20 Apr 2018 16:13 PM EST
US stocks indices caught a bid to begin the week as focus shifted largely away
from trade, geopolitics and Washington headlines and onto corporate earnings
announcements. Another blowout Netflix quarter helped resurgent FANG names and
technology shares in general lead the way higher. By Wednesday all the major
indices had retaken their 50-day moving averages and traded at roughly a one
month high. WTI crude prices tracked towards $70 a barrel for the first time
since 2015, helped by jawboning from OPEC and non OPEC producers heading into a
meeting in Saudi Arabia. Relatively benign CPI figures on both sides of the
Atlantic fostered stubborn buying at the long end of the government Treasury
curves sending yields lower. The flattening saw the US 2-10-year spread narrow
towards 40 basis points for the first time in more than a decade and kept banks
and financials from rallying.
The tone shifted though later in the week. Rising commodity prices and robust
manufacturing surveys resulted in a sentiment reversal and bond prices sold off
sending yields higher. Stocks fell in tandem with Treasury prices led by
weakness in the homebuilding names. Technology shares also reversed course as
high profile decisions by both US and China regulatory bodies cast a pall over equity
markets as many noted this was another potential theater in a US/China trade
war. Consumer staples and dividend focused stocks slumped into Friday while
financials outperformed. The US dollar firmed up helped by the higher rates and
more soft economic data out of Europe. The FTSE rallied into Friday after BOE
officials tempered rate hike expectations for the remainder of 2018. For the
week, the S&P500 gained 0.5%, the DJIA added 0.4%, and the Nasdaq rose
0.6%.
Earnings season ramped up with more reports from key financial, industrial and
technology names. Goldman Sachs and Bank of America modestly beat expectations
but still don’t seem to be reaping great benefits from rising rates. GE’s stock
rebounded off of recent lows as it reported a ‘kitchen sink’ quarter and
restated results for the last two years on accounting changes. Netflix
reinvigorated the tech sector and its shares surged to fresh all-time highs
after demonstrating it is still growing its subscriber base at a rapid rate.
IBM shares fell as it reported disappointing growth rates in its storage and
cognitive solutions segments. Pinnacle Foods traded up nearly 10% on Friday
following Jana’s disclosure that it has built an activist stake and plans to
push for a sale of the packaged food company.
MONDAY 4/16
BAC Reports Q1 $0.62 v $0.59e, Rev $23.1B v $22.9Be
*(US) APR EMPIRE MANUFACTURING: 15.8 V 18.6E
*(US) MAR ADVANCE RETAIL SALES M/M: 0.6% V 0.4%E; RETAIL SALES EX AUTO M/M:
0.2% V 0.2%E
000063.CN US govt said to ban US companies from selling to ZTE for 7
years for violations related to Iran and North Korea - financial press
(US) Pres Trump to nominate Richard Clarida as Fed Vice Chair and Kansas
banking regulator Michelle Bowman to Fed Board - press
04/16 (RU) Pres Trump reportedly halts plan to implement new sanctions on
Russia - Washington Post
NFLX Reports Q1 $0.64 v $0.63e, Rev $3.7B v $3.69Be
TUESDAY 4/17
*(UK) FEB AVERAGE WEEKLY EARNINGS 3M/Y: 2.8% V 3.0%E (fastest pace in 3 years);
WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.8% V 2.8%E
*(UK) MAR JOBLESS CLAIMS CHANGE: +11.6K V +15.1K PRIOR; CLAIMANT COUNT RATE:
2.4% V 2.4% PRIOR
*(UK) FEB ILO UNEMPLOYMENT RATE: 4.2% V 4.3%E lowest since 1975)
*(DE) GERMANY APR ZEW CURRENT SITUATION SURVEY: 87.9 V 88.0E; EXPECTATIONS
SURVEY: -8.2 V -1.0E
*(CN) CHINA PBOC CUTS RESERVE RATIO REQUIREMENT (RRR) BY 100BPS FOR QUALIFIED
BANKS (targeted cut); effective Apr 25th
GWR Reports Mar same-railroad carloads 279.9K, -3.9% y/y, dragged down
by EU/UK
GS Reports Q1 $6.95 v $5.67e, Rev $10.0B v $8.89Be; Raises dividend 6.6%
to $0.80/shr
*(US) MAR HOUSING STARTS: 1.319M V 1.267ME; BUILDING PERMITS: 1.354M V 1.321ME
*(US) MAR INDUSTRIAL PRODUCTION M/M: 0.5% V 0.3%E; CAPACITY UTILIZATION: 78.0%
V 77.9%E
CSX Reports Q1 $0.78 v $0.66e, Rev $2.88B v $2.83Be
IBM Reports Q1 $2.45 v $2.40e, Rev $19.1B v $18.7Be
WEDNESDAY 4/18
*(UK) MAR CPI M/M: 0.1% V 0.3%E; Y/Y: 2.5% V 2.7%E; CPI CORE Y/Y: 2.3% V 2.5%E
(slowest annual pace in a year)
*(DE) GERMANY SELLS €2.456B VS. €3.0B INDICATED IN 0.05% FEB 2028 BUNDS; AVG
YIELD: 0.51% V 0.60%; BID-TO-COVER: 1.4X V 1.3X PRIOR
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED
(CA) Bank of Canada's Poloz: rates may need to remain below neutral range,
economy not yet able to stay at full capacity on its own; deliberations are
focused on appropriate pace of rate hikes
(UK) House of Lords votes for Brexit amendment that would keep the UK in the
Customs Union with the EU (as expected); vote was 348-225, going against PM
May's wishes
(US) US reportedly targeting NAFTA deal in 3 weeks - CNBC
*(US) FEDERAL RESERVE BEIGE BOOK: REITERATES ACTIVITY EXPANDED AT MODEST TO
MODERATE PACE; Price rises expected in steel and building materials due to
tariffs
AA Reports Q1 $0.77 v $0.60e, Rev $3.09B v $3.17Be; Supply deficit to
worsen, citing China
AMZN CEO: Amazon Prime has exceeded 100M members (+ ~11% from last
reported 90M in Sept 2017); continue to invest in expanding customer base -
letter to shareholders
(CN) China NDRC: Has cut commercial and industrial electricity prices by avg of
10%, part of plan to lower costs for companies
THURSDAY 4/19
UNA.NL Reports Q1 Rev €12.6B v €12.95Be; affirms outlook; raises
dividend 8%; to start €6B share buyback in May
*(UK) MAR RETAIL SALES (EX-AUTO/FUEL) M/M: -0.5% V -0.4%E; Y/Y: 1.1% V 1.4%E
SHP.UK Takeda reportedly to make £46.50/shr offer in cash and stock -
press
QCOM Confirms withdrawal and refiled NXPI notice of acquisition at
MOFCOM request
*(US) APR PHILADELPHIA FED BUSINESS OUTLOOK: 23.2 V 21.0E
(UK) Bank of England (BOE) Gov Carney: should prepare for a few interest rate
hikes over next few years; expect there will be differences of opinion at May
policy meeting - BBC interview
(US) Reportedly Pres Trump is telling associates that he does not need to
remove Mueller, Deputy AG has told Trump that he is not the target of the
Special Counsel's Russia probe - press
(UK) EU said to comprehensively reject UK Brexit proposals for solution on
Irish border – press
PF Jana discloses 9.5% stake, will push for a sale - 13D filing
*(JP) JAPAN MAR NATIONAL CPI Y/Y: 1.1% V 1.1%E; CPI EX FRESH FOOD (CORE): 0.9%
V 0.9%E
FRIDAY 4/20
5423.JP Tokyo Steel reports FY17/18 Parent Net ¥11.3B v ¥11.1B y/y, Op
¥10.5B v ¥10.5B y/y, Rev ¥164.1B v ¥121.8B y/y; To buy back up to 1.61% of
shares for ¥2.0B
941.HK China Telecom reports Q1 (CNY) Net 25.8B v 26.0Be, Rev 185.5B v
184.0B y/y
WFC OCC and CFPB confirm Wells Fargo to pay $1B settlement of
violations in auto insurance and mortgages
GE Reports Q1 $0.16 v $0.11e, Rev $28.7B v $27.9Be
SLB Reports Q1 $0.38 v $0.38e, Rev $7.83B v $7.85Be
(EU) Reportedly ECB sees room to wait until July to signal end of QE program -
press
