Stocks Consolidate Breakout as Earnings Roll Out

Equities consolidated their breakout move from the previous session on Thursday, posting small losses as investors were focused elsewhere.

The first-quarter earnings season is heating up. Slightly dovish comments from Federal Reserve vice-chair Stanley Fischer sent the dollar lower on hopes of a postponed rate liftoff.

And the situation in Greece is back on the front pages as it looks like Athens could miss its International Monetary Fund debt payments in May — setting the stage for a final showdown in a long simmering feud between the newly elected leftist government and the European establishment.

In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost 0.1%, the Nasdaq Composite lost 0.1%, and the Russell 2000 lost 0.2%.


Technically, a pause isn’t out of the ordinary given the way the NYSE Composite Index punched out of a powerful resistance level going back to July. The bulls still are in control with breadth measures improving, option activity swinging back to calls, and the CBOE Volatility Index (VIX) or “fear gauge” dropping hard and fast.

The weakness in the dollar helped lift crude oil again, which gained 0.3% to close at $56.58 after touching levels not seen since before the Christmas break.

Consumer staples led the way at the sector level, rising 0.4% as a group with discretionary and financial stocks also in the green. Tobacco purveyor Philip Morris International Inc. (NYSE:PM) was a standout, blasting 8.7% higher on a high quality earnings beat and guidance raise on improvement in key markets including the European Union. Netflix, Inc. (NASDAQ:NFLX) rose 18.2% after reporting improved subscriber growth momentum and upbeat sentiment on content.

Semiconductors were soft after a strong performance on Wednesday, falling 0.5% as a group with Sandisk Corporation (NASDAQ:SNDK) weighing on the tape with a 4.4% drop on soft pricing and supply challenges.

Citigroup Inc (NYSE:C) gained 1.5% on a clean Q1 report thanks to investment banking results and an effort to control expenses. After the close, American Express Company (NYSE:AXP) reported an earnings beat but a revenue miss and issued cautious guidance as the company prepares to end its relationship with Costco Wholesale Corporation (NASDAQ:COST).

Homebuilder stocks were hit, with the iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) down 1.9%, on soft March housing stocks data. Permits dropped 5.7%, the largest decline since last May. However, in a sign that newly aggressive buyers, low mortgage costs, and limited supply are about to lift the housing market, single-family starts increased 4.4% while permits were up 2.1%.

The drop in the dollar is providing a big lift to foreign equities; with the Vanguard All-World Ex-US (NYSEARCA:VEU) recommended to Edge subscribers up 5.2% so far this month.

VEUAnthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.

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