The retailers rebounded last week

BY  | FROM  | 2015-06-09 15:42

It was a news-filled week, as the market reacted to economic reports.  The schedule of events (and releases) saw numerous intraday swings, limited in size, again making the market feel more volatile than it was.  However, while there were justifications for a strong move (M&A, trade, Greece, the IMF, the EU) the market ended the week, and four of its five days (Thursday was off by 0.86%), with minor changes. 

Greece postponed its payments to creditors until the end of the month, upsetting many and increasing the stakes of the negotiations (guaranteeing that it will remain in the news and impacting at least European markets next week).  The ECB said it would do whatever it needed to do to help the economy, and if that meant bond markets would be volatile—get used to it.  The IMF instructed the U.S. Fed on when it should raise rates, in this case not until 2016, which was not taken well in the press (there was no comment from the Fed), as the U.S. employment report posted a strong recovery, pushing September back to being the month of choice for the Fed to increase rates (in 2015). 

Through it all, the market gyrated but did not post large swings or significantly higher trading levels.  While it is possible the market is happy where it is, it is also feasible that a stronger reason to move (up or down) is necessary, and the current scheduled events were not yielding the grade.  Opinions and predictions on (and off) the Street varied, but the one issue common in most of the notes and discussion of the week was that interest rates have inched higher and were expected to inch more.  In economic data, the April Goods & Services report came in with a 19.2% lower deficit than expected, as exports were up 1.0% (even as the U.S. dollar made them more expensive), and imports declined 3.3% (as they were cheaper). 

The Fed Beige Book reported a rebound in Q2 2015, with none of the issues of Q1 2015, as growth was noted, but limited.  The employment report came in much stronger than expected, as 280,000 net new jobs were created, when 225,000 were expected.  Unemployment increased to 5.5% (from 5.4%), but a higher participation rate appeared to be the reason.  Hourly Earnings increased more than expected, up 0.3%, and the year-over-year gain was 2.3%, as the average work week remained unchanged. 

Overall, the report was seen as the rebound from the poor Q1 2015 numbers and potentially moving the Fed to act sooner. It was another strong week for M&A, as semiconductor Intel’s (INTC; down 7.6% for the week) rumored offer for Altera (ALTR; up 5.3% for the week) came through, with a cash price of USD 16.7 billion.  New rumors, which pushed stock prices up, included satellite television service issue Dish Network (DISH; up 6.7% for the week) in talks to merge with T-Mobile (TMUS; up 0.8% for the week), and casino and resort operator Wynn Resorts (WYNN; up 8.4% for the week) to merge with MGM Resorts International (MGM; up 1.1% for the week).

On an issue level, retailers rebounded, as Urban Outfitters (URBN) gained 5.7% (becoming positive year-to-date by 3.4%), as Michael Kors (KORS) gained 5.1%, but remained off 34.9% year-to-date. Financials generally did better, as Zion Bancorp (ZION) added 10.2%, Prudential Financial (PRU) and Regions Financial (RF) each added 4.3%, and Bank of America (BAC) closed up 4.1%. For the week, the market posted a 0.69% decline after posting a 0.88% decline the previous week (with three weeks of small gains before that), to close at 2,092.8, resulting in a 1.65% year-to-date gain, and 1.78% off the closing high.  The level was under the 2,100 psychological mark and at a support level. 

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