Stocks mostly moved higher on Friday, pushing the NYSE Composite Index to fresh record highs as it extends further out of the consolidation range that had held stocks in stasis since last summer.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 gained 0.2% to set a new record high, the Nasdaq Composite gained 0.7% to set a new closing high on solid big-tech earnings and the Russell 2000 lost 0.3%.
The dollar was weak again, gold sold off and crude oil lost 1%.
It feels like the dot-com fever of early 2000 all over again as names like Amazon.com, Inc. (NASDAQ:AMZN) (recap) and Microsoft Corporation (NASDAQ:MSFT) (recap) soared to gains of 14.1% and 10.5%, respectively, after reporting solid results on Thursday night. Edge Pro subscribers benefited with a nice 333% gain in their May MSFT $27 call option positions recommended on Monday.
AMZN reported a Q1 beat on all metrics despite currency headwinds with analysts upbeat on the growth in the Amazon Web Services segment. For MSFT, excitement is building for the upcoming Windows 10 launch later this year as devices and cloud services compensates for stagnation in the legacy licensing and PC areas.
Apple Inc. (NASDAQ:AAPL) gained 0.5% as market reaction to the Apple Watch remains white-hot ahead of earnings after the close on April 27. Starbucks Corporation (NASDAQ:SBUX) gained 4.9% on better-than-expected comp store sales growth of 7% (vs. the 5.1% street estimate) and positive takeaways on food innovation, market share gains and momentum in mobile order and payment.
The Week to Come
Looking ahead, Ford Motor Company (NYSE:F), Twitter Inc (NYSE:TWTR) and United States Steel Corporation (NYSE:X) will report Tuesday.
While the Q1 earnings season continues to roll on, focus will turn towards the Federal Reserve policy announcement on Wednesday, April 29. The stakes are high as recently dovish commentary from Fed officials, as well as a weakening in the flow of economic data, has led the market to push back its timing of rate liftoff into late 2015 or early 2016. A June rate hike looks like it’s increasingly off the table.
Wednesday also will feature the initial estimate of Q1 GDP growth, which is expected to be soft given the drag from the strong dollar, poor retail sales and general sluggishness related to the severe winter weather suffered in many parts of the country. Analysts are looking for growth of 1% but could be setting themselves up for disappointment: The Atlanta Fed’s GDPNow real-time estimate stands at just 0.1%.
A rebound should follow, with Credit Suisse looking for Q2 GDP growth of 3.7% thanks to a rise in consumer spending. The Fed will likely want to confirm a turnaround in both growth and inflation, and see job gains bounce back after a disappointing March payroll report, before narrowing in on a rate hike timing window.
Central to this outlook will be the release of the latest Employment Cost Index data on Thursday, which should hopefully confirm that a tightening labor market is finally translating into healthy wage gains for working Americans. Credit Suisse is looking for acceleration in the annual growth rate of total compensation to 2.6% — pushing deeper into pre-recession territory.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
