Have earnings reports justified the stock market's reaction? Not really. Right now, it seems as though expectations going into earnings season were so low that any positive news was greeted with cheers. While total profits for 202 S&P 500 companies were up 8.7% over first quarter 2014, revenues were essentially flat. Weak revenue numbers indicate that companies struggled with slow demand last quarter and achieved profitability through cost-cutting measures. Looking ahead at the rest of earnings season, some analysts project that overall earnings for S&P 500 companies will be flat on 5.1% lower revenues.Worse, currency headwinds from a strong dollar and global economic issues may affect demand in the second quarter as well.
The week ahead is packed with important economic events: a Federal Reserve Open Market Committee meeting, the first estimate of Q1 economic growth, and a raft of company earnings reports. No interest rate changes are expected at the Fed's policy-setting meeting, but officials may clarify their thoughts on first quarter economic performance.
Right now, the future timing of rate changes is anyone's guess. Economists are focusing on determining how much of weak first quarter data is weather related and how much was due to lingering economic forces like a strong dollar and soft global growth. Though a June rate hike isn't off the table, some Fed officials are hinting that higher interest rates might come later in the year. With respect to markets, we can expect further volatility as investors digest earnings reports and economic data.
A special security note:
Due to a global increase in financial identity theft and email hacking, please do not send confidential information such as social security numbers, EIN, DOB, account numbers or any other sensitive data via email. Also, please do not email trade requests as they cannot be acted upon without verbal communication and confirmation. For security reasons, we need you to reach out to the office directly regarding these matters.
Tuesday: S&P Case-Shiller HPI, Consumer Confidence
Wednesday: GDP, Pending Home Sales Index, EIA Petroleum Status Report,FOMC Meeting Announcement, 2:00 PM ET
Thursday: Jobless Claims, Personal Income and Outlays, Employment Cost Index, Chicago PMI
Friday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg. Index, Consumer Sentiment, Construction Spending
Tight housing supply holding back market. A limited number of homes for sale is keeping back a spring surge in the housing market. Nearly three-quarters of the available homes for sale are "stale" and have sat on the market for more than a month with little buyer interest. High prices may be turning off prospective buyers.
No Greek deal in sight. As the deadline to a Greek debt bailout edges closer, no permanent solution is emerging. Greece is having trouble repaying loans to Eurozone creditors, and lenders warned Friday that no fresh aid will come unless the cash-strapped nation agrees to serious economic reforms.
Oil prices diverge. Though U.S. crude oil prices fell on worries of another production glut, international Brent crude prices rose to 2015 highs as fighting in Yemen threatened supplies. This push-pull in prices makes it hard for analysts to predict the direction of prices.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.