U.S. equities finished higher on Friday despite a batch of poor earnings news and underperformance by large-cap tech stocks.
Outside of earnings, it was a relatively quiet session as the Federal Reserve remains in a pre-meeting media blackout period ahead of its policy announcement on April 27.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 was unchanged, the Nasdaq Composite lost 0.8% and the Russell 2000 gained 1%. Treasury bonds were weaker, the dollar was stronger, gold lost 1.2% and crude oil gained 1.3% to close at $43.75 a barrel.
Energy stocks led the way on oil’s rise, adding 1.3% as a sector. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) gained 7.9% on reports of a management shakeup. Troubled chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD) gained 52.3% after a big first-quarter earnings beat, with upside from CPU and graphics chips sales. Q2 guidance was up 15% quarter-over-quarter.
But technology overall lagged, down 1.9% on a series of earnings disappointments. Microsoft Corporation (NASDAQ:MSFT) lost 7.2% after an earnings miss on Thursday night, as efforts in the cloud and other areas aren’t yet large enough to compensate for the weakness in the consumer PC market. Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) lost 5.5% on a top- and bottom-line miss. Starbucks Corporation (NASDAQ:SBUX) lost 4.9% on weaker-than-expected comp-store sales growth of 6% (vs. 6.5% expected).
In more earnings news, General Electric Company (NYSE:GE) lost 0.7% after reporting a 7% decline in organic orders and a 18% decline in organic equipment orders. Caterpillar Inc. (NYSE:CAT) fell 0.4% after missing on earnings and revenues, reporting big drops sales to the construction, rail, and energy sectors. Visa Inc (NYSE:V) lost 2.1% on a cut to its fiscal year revenue guidance, partially blamed on weakness in China.
Technical and fundamental headwinds remain.
Friday’s PMI manufacturing flash activity index dropped to 50.8 vs. expectations for a 52.0 result and a prior month reading of 51.4. Overall, the Bloomberg U.S. Macroeconomic Surprise Index — measuring how the data is coming in vs. expectations — has dropped to 14-month lows. The Atlanta Fed’s GDPNow tracking estimate of Q1 U.S. GDP growth is at just 0.3%.
On earnings, the Q1 FY2016 S&P 500 earnings growth rate is expected to be -8.9%, which would mark the fourth consecutive quarter of falling profitability and the worst result since 2009.
Technically, U.S. equities are contending with massive overhead resistance from a topping pattern that started back in 2014 amid narrowing breadth. With stocks from Apple Inc. (NASDAQ:AAPL) — which Edge Pro subscribers are betting against with the May $107 puts — to Amazon.com, Inc. (NASDAQ:AMZN) rolling over, there are fewer and fewer names holding the major averages aloft.
It’s also worth mentioning that America is standing alone here, with stocks around the world much less ebullient, as shown in the chart of the iShares MSCI ACWI ex US Index Fund (NASDAQ:ACWX) in black above versus the Dow Jones in red.
Investors, stay cautious.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
