Financials did the best for the week

BY  | FROM  | 2016-04-18 16:17

It was show time, at least on Broad and Wall, as the Street Banked on the opening act of Q1 2016 earnings, and groupies (a.k.a. funds) rushed to re-allocate back into the financials after allocating out of them. The result was a few extra pennies for execution (and New York via trading taxes), with a broad 3.95% gain for the sector.  But one week does not make a year-to-date, as financials remain off 3.94% year-to-date, the worst of any sector for the year.
Traders and investors will be watching the oil producers meeting in Doha, Qatar on Sunday (April 17, 2016; seven hours ahead of the Street) for any indication of limiting production.  Even if some type of freeze was agreed on, the prior levels used would still be higher than the current ones, which would indicate high supplies—then there is the issue of sticking to the limits, as well as Iran.
In M&A, Standard Charter PLC (SCBFF; up 18.3% for the week) was reported to be seeking to sell USD 4.4 billion in assets to restore its balance sheet. A report said the Daily Mail (of the U.K.) was set to join the bidding for Yahoo!’s (YHOO; up 1.2% for the week) assets; Alphabet (GOOG) and Verizon (VZ) are also expected to submit separate bids before the April 17, 2016, deadline.
In economic news, U.K. inflation for March came in at 0.5% year-over-year, and core inflation came in at 1.5%.  Italian banks have agreed on a USD 5.7 billion bank fund.  The IMF again cut its global forecast, estimating that 2016 will see 3.2% growth (down from January’s 3.4%), as it increased China’s to 6.5% (from 6.3%), while it reduced the U.S. rate to 2.4% (from 2.6%).  Chinese March exports increased 11.5% in U.S. dollars, as imports declined 7.6%.  The Bank of England left rates unchanged, as the June 23, 2016, Brexit remains a major uncertainty for the economy. Chinese first quarter GDP came in as expected, at 6.7% (year-over-year), down from the prior quarter’s 6.8%.  The quarter saw growth, helped by stimulus, as concern continued that growth was slowing. 
In the U.S., the March Export/Import report posted a 0.2% gain in imports, which were down 6.1% year-over-year, and exports were flat in March and down 6.2% year-over-year.  Retail sales for March missed, posting a 0.3% decline when a 0.1% gain was expected, as the ex-autos component came in up 0.2%, when it was expected to be up 0.4%.  The March PPI came in 0.1% lower, when a 0.3% gain was expected, with the year-over-year rate at -0.1%, as the PPI ex-food and energy year-over-year rate was up 1.0% (not as pleasing for the Fed).  The CPI for March came in with a year-over-year rate of 0.9%, as Core CPI came in up 2.2% for the year-over-year (which should have please the Fed).  March’s Industrial Production came in at -0.6% for the month, when a 0.1% decline was expected, as Capacity Utilization came in at 74.8%, when a higher 75.3 was expected. 
In layoffs, Aluminum issue Alcoa (AA; up 6.8% for the week) said it cut 600 workers and would cut another 400.  Japanese brokerage issue Nomura Holdings said it would discontinue its European equity market operations.  Railroad shipper CSX (CSX; up 4.6% for the week) said it expects coal shipments to decline 20% in 2016 and will cut costs and workers to compensate.  Bank JPMorgan (JPM; up 7.2% for the week) said it would cut 5% of its Asian wealth management workforce.  In other news, UnitedHealth Group (UNH; up 1.3% for the week) confirmed it was pulling out of Obamacare in two states (Georgia and Arkansas).  The company had entered the program in 2015 after staying out of it in 2014 (when it started); it continues to participate in other states.  Coal miner Peabody Energy (BTU) filed for chapter 11 bankruptcy, which permits companies to continue to operate with the intention to regain solvency.  U.S. regulators (the Fed and the FDIC) said five large banks (Bank of America [BAC]; Bank of New York Mellon [BK]; JPMorgan [JPM]; State Street [STT]; and Wells Fargo [WFC]) had to adjust their “living wills” (plans for how they would handle a possible bankruptcy); the banks have until October 2016 to submit new plans. 
For the week, 376 issues gained, which was a full reversal of last week’s 131 issues and the prior week’s 411 issues.  Decliners decreased to 126, from last week’s 373 and the prior week’s 91.  Eight issues gained at least 10% (three did last week and one the week before that) and 67 others were up at least 5% (12 were last week).  One issue declined at least 10% (seven did so last week), as eight issues lost at least 5% (47 did so in the prior week).  Year-to-date, breadth remained positive, as 314 issues were ahead, up from last week’s 281 issues; 140 issues gained at least 10% (110 last week), compared with 189 down issues, down from last week’s 222, with 68 of them down at least 10% (90 last week). 
For the week, the market closed at 2,080.73, up 1.62% for the week, as the year-to-date inched up 1.80%, and the Street’s fantasy of a new closing high became a battle cry (May 21, 2015, 2,130.82, 2.35% away). Sectors moved up for the week, as eight of the ten gained, with all seven of the eight up over 1%.  On the down side was consumer staples, off 0.78%, as spending concerns continued, but the sector remained up 4.79% year-to-date.  Telecommunication posted their second week of losses, off 0.52% this week and off 2.33% last week, as it is up 11.61% year-to-date (second best); Utilities, which squeaked by via a 0.19% gain for the week, has the best year-to-date, up 12.91%. Financials did the best for the week, as banks did not do as bad as they might have done in earnings, as they rebounded 3.95% for the week, but still had the honor of being the worst sector year-to-date, off 3.94%.  Energy moved up 1.98%, as oil set a new 2016 high (just don’t compare the price to last year), with the sector up a respectable 5.98% year-to-date (but still off 18.98% from the end of 2014). Trading volume increased 6% for the week, as earnings season began, and volume is now slightly above (1%) the one-year average.  Measurable volatility (the high-over-low price variance) increased but remained low, as the rate decreased to 2.36% from the prior week’s 1.98% (and 2.31% the week before that) and remains well below the 3.01% one-year average. One day posted at least a 1% change (up 1.00% on Wednesday), as three days did so last week.  The VIX declined back to 13.62, from last week’s 15.36 and closer to the 13.10 close in the prior week (2015 year-end closed at 18.21, with the 25-year average at 19.66).  Interest rates slightly moved, as earnings came to the front page (with the Fed on page two), and the 10-year U.S. Treasury closed at 1.75%, up from last week’s 1.72% (and the prior week’s 1.77%).  The 30-year U.S. Treasury closed up at 2.56%, a tick up from last week’s 2.55% (and 2.60% close the week before that).  Oil moved up, ahead of the April 17, 2016 OPEC and non-OPEC producers meeting, as oil closed at USD 40.40, up from last week’s USD 39.66 (year-end 2015 was USD 37.06).  Gold moved up, closing at USD 1,235.80, down from last week’s USD 1,240.10 and the prior week’s 1,223.60.  The euro was little changed, as it closed at 1.1285, down from last week’s 1.1399 (it closed the prior week at 1.1392).  The pound moved down, as it closed at 1.4202, up from last week’s 1.4128 and the prior week’s 1.4228.  The yen (quoted in yen-to-U.S. dollars, so higher is weaker) was the currency of choice, as it strengthened even as its interest rates remained negative, closing at 108.76, up from last week’s 108.06 (and miles away from year-end’s 2015 120.30).  The yuan closed at 6.4781, down from last week’s 6.4673 (and the prior week’s 6.4627). 

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