From Briefing.com: The stock market wrapped up the abbreviated week with its third consecutive loss as investors refused to be swayed by a handful of bullish catalysts. The major averages settled at the lower end of the day's trading range with the tech-heavy Nasdaq (-0.5%) finishing just a step ahead of the S&P 500 (-0.7%) and the Dow (-0.7%) as the technology sector (-0.4%) outperformed. For the week, the S&P 500 lost 1.1%.
JPMorgan Chase (JPM 84.40, -1.00), Citigroup (C 58.04, -0.47), and Wells Fargo (WFC 51.35, -1.77) kicked off the earnings season on Thursday morning with some better than expected results. All three companies beat earnings expectations, but differed on their top line results; JPM and C beat revenue estimates while WFC missed its mark. Investors thought about rallying around the upbeat reports, pushing JPMorgan Chase and Citigroup 2.0% higher in early action, but the gains did not last.
In the end, the financial sector (-1.3%) finished the day solidly lower, but it was not the worst performing sector. The distinction is worth pointing out, considering the fact that the financial group has been an influential force since the presidential election, consistently leading the broader market higher and lower.
The energy sector (-1.9%) did finish at the bottom of the day's standings. The energy space typically moves in tandem with crude oil, but that wasn't the case today as the commodity eked out a slim 0.1% gain. WTI crude settled at $53.18/bbl, ending the week higher by 1.8%.
On a positive note, the biotechnology industry was a diamond in the rough, evidenced by the 0.7% increase in the iShares Nasdaq Biotechnology ETF (IBB 290.59, +1.94). The solid performance gave the health care sector an edge while the technology group's strength stemmed from a solid performance from large-cap names like Facebook (FB 139.39, -0.19) and Alphabet (GOOGL 840.18, -1.28).
In the bond market, Treasuries closed mostly flat despite the sell-off in equities. The 10-yr Treasury note did manage to eke out a slim gain, leaving its yield one basis point lower at 2.23%. For its part, gold settled 0.8% higher at $1,288.60/ozt.
Investor participation was a bit below average again today with only 912.1 million shares changing hands at the NYSE floor (50-day moving average: 1.07 billion).
On the data front, March PPI, Initial Claims, and the April Michigan Consumer Sentiment Survey all came in better than expected, but, like the positive earnings reports, investors ignored the upbeat results:
March producer prices decreased 0.1%, which is below the Briefing.com consensus of 0.0%. Core producer prices where unchanged while the Briefing.com consensus expected an increase of 0.2%.
The key takeaway from the report is that the downturn in final demand prices in March wasn't just a function of a downturn in energy prices.
The latest weekly initial jobless claims count totaled 234,000 while the Briefing.com consensus expected a reading of 251,000. Today's tally was below the revised prior week count of 235,000 (from 234,000). As for continuing claims, they declined to 2.028 million from the revised count of 2.035 million (from 2.028 million).
The key takeaway from the report is that the initial claims data once again served as a reflection of a tightening labor market.
The preliminary reading of the University of Michigan Consumer Sentiment Index for April rose to 98.0 (Briefing.com consensus 96.3) from 96.9 in March.
The key takeaway from the report is that consumers are feeling very good about current economic conditions, evidenced by the Current Economic Conditions Index rising to its highest level since 2000 and nearly reaching the all-time peak of 121.1 set in 1999.
The stock market will be closed tomorrow in observance of Good Friday, but investors will still receive some notable economic reports. Both March CPI (Briefing.com consensus 0.0%) and March Retail Sales (Briefing.com consensus -0.1%) will cross the wires at 8:30 ET while February Business Inventories (Briefing.com consensus 0.3%) will be released later in the morning at 10:00 ET.
On Monday, participants will receive April Empire Manufacturing at 8:30 ET, the April NAHB Housing Price Index at 10:00 ET, and April Net Long-Term TIC Flows at 16:00 ET.
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Week in Review: Caution Persists
Last week's headlines kept on giving as investors displayed caution in light of the ongoing situations in Syria and North Korea. The S&P 500 ended the week with a loss of 1.1%, but, more notably, the benchmark index finished the week below its 50-day moving average (2352).
North Korea took center stage at the beginning of the week after the U.S. Navy ordered the Carl Vinson Strike group towards the Korean Peninsula. This prompted rumors of Chinese troop movement along the North Korean border, but these claims were later refuted by China's Defense Ministry.
President Trump added some fuel to the fire on Tuesday morning, tweeting that he would like China's help in diffusing the North Korean situation, but the U.S. is willing to solve the problem on its own. However, through all the noise, the S&P 500 was flat through the first two days of the week as its 50-day moving average provided a measure of support.
North Korea will celebrate the birth anniversary of founder Kim Il-sung on April 15 and there is speculation that another nuclear test could be conducted that day.
The conflict in Syria took precedence on Wednesday as U.S. Secretary of State Rex Tillerson made a stop in Moscow. Mr. Tillerson met with Russian President Vladimir Putin, despite earlier reports that the U.S. diplomat would not have access to the Russian president, but conversations were reportedly heated. Nonetheless, the two countries agreed to establish a working group to iron out their issues.
Investors shifted their focus back to the home front on Thursday with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) kicking off the earnings season. All three companies reported better than expected earnings, but were mixed when it came to revenues; JPM and C beat top line estimates while WFC fell short. However, the banks were unable to capitalize on the upbeat reports, which acted as a discouraging signal to the broader market.
If one thing can be said for sure after reflecting on this week's activity, it's that investors are becoming more skeptical about the future, evidenced by the CBOE Volatility Index (VIX 15.67, -0.10), which increased three points for the week. The VIX index now sits at its highest level since the presidential election.
The lingering geopolitical issues led to a notable dip in rate hike expectations. The fed funds futures market ended the week pointing to a 57.3% implied probability of a June hike, down from last week's 70.6%.
Technology stocks closed modestly lower today, outperforming the weakness in the broader market heading in to the holiday weekend. The Nasdaq 100 (QQQ) fell 0.4% while the S&P 500 (SPY) fell 0.7%, marking a two-month closing low.
The Nasdaq 100 (QQQ) is quickly approaching support at the 130 level, near its 50 day moving averages. The S&P 500 broke through its 50-day moving average yesterday after bouncing of the key support level on Tuesday.
Semiconductors (SMH) got crushed this week, falling 3.6%. British Dialog Semiconductor fell 14% this week on reports that Apple (AAPL) may bring some of its chip business in house. This sparked some concern among Apple's massive supply chain, mostly chip makers. While the largest company in the world is great customer to have, customer concentration is a risk that also weighs on a stock;s earnings multiple. Semiconductors have had a huge run so a pullback seemed due but the iPhone 8 cycle is still in front of us.
Applied Optoelectronics (AAOI) raised first quarter guidance last night. The company has now reported four consecutive blow-out quarters. The stock closed up 11% after gapping up over 20%.
Yext (YEXT) priced a 10.5 million share IPO at $11, above the $8-10 expected range. The stock opened at $14 and closed at $13.41. YEXT describes itself as a "knowledge engine" whose platform allows businesses to manage their digital knowledge (structured information that a business wants to make publicly accessible like addresses, phone numbers, menu details etc.) in the cloud and to sync it to services and platforms across the web.
As a reminder, the equity markets are closed tomorrow for Good Friday.
Next week, earnings first quarter earnings season will start in earnest:
Barracuda Networks (CUDA) and Netflix will report on Monday afternoon.
IBM (IBM) will report on Tuesday afternoon, EBay (EBAY) and QUALCOMM (QCOM) will report on Wednesday afternoon and Visa (V) and Proofpoint (PFPT) will report on Thursday afternoon.
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Last Update: 13-Apr-17 09:34 ET
Taiwan Semiconductor Modestly Lower After Reporting In-Line Earnings on Light Revenue (TSM)
Taiwan Semiconductor (TSM 32.21, -0.08) is lower by 0.2% after reporting in-line earnings on light revenue and guiding second quarter revenue below market expectations.
The world's largest contract chipmaker reported in-line first quarter earnings of TWD3.38 per share on revenue of TWD233.91 billion, which increased 14.9% year-over-year, but was shy of expectations.
Gross margin improved to 51.9% from 44.9% one year ago.
Shipments of 16/20-nanometer technology made up 31.0% of total wafer revenue while 28-nanometer process technology accounted for 25.0% of total wafer revenue. 28-nanometer and more advanced technology made up 56.0% of total wafer revenue.
The company noted that the Taiwanese dollar has been one of the best performing currencies in Asia so far this year, which weighed on results. The company expects the Taiwanese dollar to appreciate 2.1% in the second quarter, which prompted cautious guidance.
For the second quarter, the company expects that revenue will be between TWD213 and TWD216 billion, which is shy of current market expectations. Gross margin is expected between 50.5% and 52.5%.
In addition to reporting its quarterly results, Taiwan Semiconductor said it will not bid for Toshiba's memory unit after failing to find a clear synergy.
