Market tone
Global stocks rose this week led by energy- and commodity-sensitive companies. The Chicago Board Options Exchange Volatility Index (VIX) dropped a bit from 14.36 to 13.22. Crude oil prices rose to $43.39 from $39.77 a week ago. This week’s reports and international news of interest:
- Saudi Arabia refused to freeze oil production without Iran’s participation, while Iran elected not to participate in the talks in Doha, Qatar
- Chinese stocks trading in Shanghai have rebounded from the low on January 28th (adding 12%)
- Chinese stock trading in Hong Kong (Hang Seng China Enterprises Index) have returned about 22% since the lows in mid-February. Concerns about currency stability and slower economic growth have been alleviated for now
- US jobless claims fell to the lowest level since 1973
- New claims were only 247,000 versus a consensus of 265,000. Although this is the lowest level since 1971, the size of the labor market is much larger today than it was over 40 years ago. The fact that employers are holding onto their employees appears to be a good sign for the labor market
- ECB holds key interest rates unchanged at 0.0%, 0.25% and -0.40%, respectively. ECB president Mario Draghi warned that inflation may turn negative in the coming months
- Emerging market nations cut interest rates
- Over the past few weeks, the central banks of India, Indonesia, Turkey, Taiwan and Hungary have all lowered policy interest rates in an attempt to improve slow economic growth
- Brazil moves closer to impeaching Rousseff as the nation remains in recession and political strife
- In the largest emerging market bond offering to date, Argentina has raised $16.5 billion. This comes after the country defaulted on more than $80 billion in debt in 2001
- Weak Q1 results raise worries over future bank profits. Five of the largest six US banks missed their earnings target in the first quarter. In addition to lower levels of trading desk revenue, the low interest rate environment has impacted net interest rate margins
- SunEdison's (NYSE:SUNE) Chapter 11 filing: ED has lost about 99% of its stock market value since last summer and owes creditors nearly $10 billion. The company continues to deal with five failed deals with a combined value of about $3.8 billion. At least two of these deals are in the renegotiation or litigation process
THE WEEK AHEAD
- US new homes sales are reported on Monday, April 25th
- US durable goods orders are announced on Tuesday, April 26th
- The FOMC meets on Tuesday and Wednesday, April 26th – 27th
- US GDP is announced on Thursday, April 28th
For the week, the S&P 500 rose by 0.52% for a year-to-date return of 2.33%.
Summary
IBD: Uptrend under pressure
GMI: 5/6- Buy signal since market close of March 2nd
BCI: Moderately bullish, favoring out-of-the-money strikes 2-to-1. A mixed second week of earnings season with some major tech stocks disappointing. Market held up well despite this.
WHAT THE BROAD MARKET INDICATORS (S&P 500 AND VIX) ARE TELLING US The S&P 500 is currently in an uptrend (higher highs and higher lows) while the VIX (CBOE Volatility Index) is under 14. In the past six months, the S&P 500 is up 2% while the VIX has declined by 10%. The near term market trend is BULLISH.