Markets “In a Nutshell” for April 23, 2019

Investment Week at a Glance

Stocks finished mixed for the week. The Dow Jones Industrial Average was up 0.56%, the S&P 500 fell 0.08 %, the New York Stock Exchange Composite (2,000 stocks) fell 0.36% and the average investors index (Value Line Index) was down 0.54%. Foreign stocks (DJ Global ex U.S.) were up 0.26%. Bond prices were unchanged for the week, keeping the yield on the 10-year U.S. Treasury at 2.56%. (Data sources: Wall Street Journal)

Boring is good

Stocks continue to slowly inch their way to the records that were set last year in late September, but recent weeks have been exceptionally quiet in terms of price action and trading volumes. This is in contrast to the end of last year where volatility took control of the market and filled the market with a deep pessimism. As most of those fears of global growth slowdown and a China trade war have abated, the market has resorted back to the methodical climb higher experienced in 2017, where nothing seems to be able to knock it off its course. The Mueller Report release is a prime example of a big political news event that made big headlines, but never made much of an impact on markets. While there may not be big moves forward like the 1st Quarter of this year, a slow, consistent move higher in stocks would be a welcome sign to the stability of the market. (Wall Street Journal)

Investors not rewarding companies this earnings season

A strong earnings season is well under way, but investors are becoming much harder to impress this time around. With earnings expectations having been improved all throughout the 1st Quarter as much of the global growth slowdown scare went away, investors are showing that they are either unimpressed with positive surprises or disappointed in an average performance. This type of environment makes it difficult for companies reporting to get the typical share price bounce that they expect after they report. As of Friday, of the companies that had reported earnings for the 1st quarter, 73% had reported better than expected earnings, well above the roughly 60% that usually do. This is a good sign that market sentiment isn’t as bad as it once was, but investors aren’t rewarding those companies like they typically do during earnings season.

This may be a good sign that investors saw 2018 as a reality check and they don’t want to pay to high of a price for a company that’s not reporting anything but exceptional results. This could contribute to the stability of the market, even if it would damped short term returns. As earnings season continues, it seems like this trend will hold and it will be especially interesting to see whether the sentiment from the leaders of these companies is positive enough to keep this market going for the foreseeable future. (Barron’s)

Quiz:

How much have gasoline prices risen since their low on Christmas Eve?

a. 14%

b. 19%

c. 23%

d. 27%

Answer is below…

 

Have a good week!

 

Answer to quiz:

d. Gasoline prices have risen 27% to a national average of $2.84 a gallon since a Christmas Eve low (GasBuddy)