The Capitl flow is to support the US stock markets into bull

BY  | FROM  | 2015-05-11 14:55

TGIF (Thank Goodness It’s Friday) proved to be a blessing, as going into Friday, the week was considered a loss, with concern over the economy, oil, and the U.S. dollar returning.  What changed on Friday was the monthly employment report, which came in just right for the U.S., and what changed for the Conservative party in the U.K. was not just an election win, but a majority election win. The U.S. monthly employment report showed a net gain of 223,000 new jobs, in line with the 228,000 that were expected. 

March was restated down to 85,000 from the originally reported 126,000 (which was disappointing when it was issued). The unemployment rate decreased to 5.4%, the lowest rate since May 2008; the Fed considers full employment to be in the 5%-to-5.2% area.  The expected close election in the U.K. between the Conservatives and Labour party never materialized, as Prime Minister Cameron’s Conservative party posted a majority, with a potential 326 seats (up 24 seats), giving them a majority of the 650 (as the Labour party won 230 seats, losing 26 seats).  Some progress was reported on Greek negotiations, as Greece made two May debt payments. 

Oil continued its rebound, reaching USD 62.56, but it fell back to USD 59.39.  April global equity inflows to funds set a record at USD 41.0 billion, as U.S. outflows grew to USD 35.8 billion, their highest level since October 2008.

In economic news, the March U.S. deficit increased to USD 51.4 billion, the largest since October 2008, with imports increased significantly by USD 17.1 billion, as a backlog of U.S. West Coast ships were unloaded due to a work stoppage; the event was seen as a “one-shot” increase (seems more items are being considered as “one-shots”—not a good indicator).

In M&A news, Charter Communications (CHTR) was interested in Time Warner Cable (TWC); Cablevision and Time Warner recently called off their merger due to government concern over antitrust issues.  Agrochemical issue Syngenta AG (SYT) rejected Monsanto’s (MON) USD 45 billion offer.  Microsoft (MSFT) was reportedly interested in Salesforce.com (CRM).  But it was healthcare deals that topped the week (and were the envy of traders), as biopharmaceutical Alexion Pharmaceuticals (ALXN) said it would buy Synageva BioPharmarma (GEVA), as Synageva more than doubled on the news, up 116% for the week, and Plasma Tech Biopharmaceuticals (PTBI) said it would buy Abeona Therapeutics LLC, as Plasma moved up 159% for the week.  On an issue level, Cisco Systems’ (CSCO) 20-year CEO John Chambers (65 years old) will be replaced by sales executive Chuck Robbins, as Chambers became executive chairman (Cisco was off 0.3% for the week).  Fast-food restaurant issue McDonald’s (MCD) said it would reorganize to assist growth, with plans to sell more of its company-owned stores and implement foreign changes (the issue was up 0.4% for the week).  Coffee and coffee product maker Keurig Green Mountain (GMCR) and natural food supermarket chain Whole Foods Market (WFM) both disappointed in their earnings releases (Keurig was off 12.7% for the week and Whole Foods was down 11.6% for the week). 

Chinese web issue Alibaba (BABA) reported a 45% gain in sales, which helped Yahoo! (YHOO), which holds 15.4% of Alibaba (Yahoo was up 3.7% for the week, as Alibaba was up 7.3%).  EU regulators delayed their decision on a tax probe into Apple (AAPL), Amazon (AMZN) and others, citing difficulties in getting information. For the week, the market posted a 0.37% gain, via a 1.35% Friday gain, which negated the 0.96% Monday-through-Thursday loss.  The gain left the market at 2,116.10, short of the all-time closing high of 2,117.69, set on April 24, 2015 (the stuff that dreams are made of).  Year-to-date, the market is up 2.78%, as the slow and volatile performance continues to be a discussion topic.  Breadth turned positive (thanks to Friday), as 289 issues gained for the week, up from last week’s 204 (and the prior week’s 342 gainers), and 209 issues declined, down from last week’s 297 (and the prior week’s 159).  No issues gained at least 10% (9 did last week), with 7 issues up at least 5%.  Three issues fell at least 10% (the same as last week), with 16 more falling at least 5% (30 last week).  Six of the ten sectors gained for week, up from last week’s five. Energy declined 1.15%, even as energy prices maintained its price (and slightly increased); the sector is up 1.91% year-to-date, but remains off 17.84% from the close of June 2014 (when oil was at USD 105). 

Telecommunications did the worst, off 1.45%, as AT&T (T) fell 2.1% and Verizon (VZ) declined 0.5%. Financials did the best, up 1.59%, but still remains 0.09% in the red year-to-date. Trading volume declined 5% for the week, but remained 7% higher than the one-year average.  The weekly high-over-the-low price variance increased for the third week in row to 2.56%, from the prior week’s 2.33% and 1.77% the week before that. The VIX closed a tick higher, as volatility increased, closing at 12.86, after reaching 16.36 during the week, up from last week’s 12.70.  Interest rates continued to increase, as the U.S. 10-year Treasury bond yield increased to 2.14%, from last week’s 2.12% and the prior week’s 1.91% (year-end 2014 was 2.17%).  Oil broke through the USD 60 level, reaching USD 62.58, but it fell back to close the week at USD 59.39, up from last week’s 59.11.  The U.S. dollar, similar to the week, was volatile.  The euro closed at 1.1207, up from last week’s 1.198 (and the prior week’s 1.0874); the pound was at 1.5450, up from last week’s 1.5140 (and the prior week’s 1.5188); with the yen (quoted in yens-to-the U.S. dollar, so higher is weaker) at 129.74, compared to last week’s 120.20 (and the prior week’s 118.98). With over 90% of Q1 2015 earnings in, the quarter is being considered a success, given that earnings did not decline as much as expected and that the quarter was a “one-shot” event.  The remaining issues will focus on retail, and therefore consumer spending.  Sixteen issues are scheduled to release their earnings next week (May 11-15), with 21 the week after that (May 18-22).  Highlights will include retailer Macy’s (M) on Wednesday, Kohl’s (KSS) on Thursday, and Nordstrom (JWN) after the close on Thursday.  Analyst estimate changes should start to increase, as talk of Q2 earnings pick up.

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