Stocks Fall As Earnings Season Begins
Stocks fell hard last week as the market digested the latest round of mixed economic and earnings data. Investors continue to wait for a new catalyst to emerge to help the benchmark S&P 500 break out of its current 5-month trading range. Since December 2014, the S&P 500 has been trading between 2,119 (resistance) and 1,972 (support). At this point, investors want to see how the economy and corporate earnings performed in Q1 for a better sign of when the Fed will raise rates. So far, it is too early to tell for sure, but the “data” remains weak – which likely means a June rate hike is off the table. It is best to remain patient during a range-bound market until either support (bearish) or resistance (bullish) is broken. Until then, we have to expect this sloppy sideways action to continue. Stepping back, it is important to note that even with Friday’s sell off, the S&P 500 is only -2% below its record high – which is very impressive. Eventually this market will get in trouble and roll over, but it has earned the bullish benefit of the doubt until more technical damage emerges.
Monday & Tuesday’s Action: Earnings Fail To Impress
Stocks ended mixed on Monday as earnings season began and Apple Inc ($AAPL) began taking preorders for their highly anticipated iWatch. The initial data from the company showed demand remained very strong as sales topped 1 million units. In other news, shares of Netflix ($NFLX) jumped over +3.4% after Citigroup ($C) raised the stock to Buy from Hold and said the recent drop in the stock price to low $400’s offered investors a chance to “buy the dip.” The company also is believed to be in the early stages of exploring a stock split to lower their price and increase the shares outstanding. Social media giant, LinkedIn ($LNKD) jumped 3.6% after analysts praised their acquisition of Lynda.com. Overseas, Chinese stocks soared after the Hong Kong Monetary Authority intervened in foreign exchange markets to prevent its currency from rising. China said its CPI rose in March and beat estimates.
Wednesday & Thursday’s Action: Stocks Hit Hard on Friday
Market Outlook: The Central Bank Put Is Alive And Well
Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape.