April 27, 2018 Weekly Market Recap

The S&P 500 was up and down this week, but ended little changed, closing a tick below its flat line. The Nasdaq and the Dow Jones, meanwhile, finished the week with losses of 0.4% and 0.6%, respectively, and the small-cap Russell 2000 lost 0.5%.

Earnings were the focal point, but rising Treasury yields, policy decisions from the European Central Bank and the Bank of Japan, and a historic meeting between the leaders of North and South Korea also received some attention.

This week was the busiest week of the first quarter earnings season, with more than a third of S&P 500 companies reporting their results – which largely came in better than expected. However, the market’s reaction didn’t always correlate with the upbeat headlines.

For instance, in the industrial sector, 3M (MMM), Caterpillar (CAT), Lockheed Martin (LMT), and United Tech (UTX) all dropped on Tuesday after reporting their first quarter results, which, headline-wise, came in above-consensus. Caterpillar initially shot higher, but reversed sharply, taking the broader market with it, after saying in its post-earnings conference call that margins in the first quarter will be the “high water mark” for the year. The industrial sector finished the week at the bottom of the sector standings, losing 3.2%.

Conversely, the consumer discretionary sector finished with a solid gain of 1.1%, boosted by a blowout quarter from Amazon(AMZN) – which easily topped both earnings and revenue estimates for the first quarter.

A number of technology heavyweights reported their first quarter earnings this week, including Alphabet (GOOG), Facebook (FB), Microsoft (MSFT), and Intel (INTC). Facebook soared after handily beating consensus estimates, Microsoft climbed after also beating on the top and bottom lines, Intel slid despite an upbeat report, and Alphabet tumbled after its weaker-than-expected operating margins overshadowed its much better-than-expected earnings and revenues.

Outside of earnings, investors kept a close eye on Treasury yields, which touched new multi-year highs on Wednesday before slipping in the final two sessions. The benchmark 10-yr yield crossed the psychologically important 3.0% mark for the first time in over four years, going as high as 3.03%, before settling the week at 2.96%.

The preliminary reading of first quarter GDP crossed the wires on Friday, showing an annualized increase of 2.3%, but a deceleration from the fourth quarter growth rate of 2.9%.

Across the pond, the European Central Bank released its latest policy directive on Thursday morning, which, as expected, left interest rates unchanged and confirmed that net asset purchases will remain at the current monthly pace of EUR30 billion until the end of September 2018, or beyond, if necessary.

In Asia, the Bank of Japan also left interest rates unchanged, as expected, but removed from its policy statement a reference to reaching its 2.0% inflation target in fiscal year 2019 / 2020. However, the biggest story of the week in Asia came from the Korean Peninsula, where the leaders of North and South Korea came together for a historic summit. The two leaders signed a pact that seeks permanent and solid peace and stated an aim to work towards a complete de-nuclearization of the Korean Peninsula.

Source: Briefing Investor