Stocks Volatile Q1 Earnings Kicks Off

Retail stocks were particularly strong, pushing the markets higher

It was a churning, gyrating session on Wednesday as large-cap stocks ramped at the open and struggled to hold its gains through not one but two short-lived excursions into the red.

In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained 0.3%, and both the Nasdaq Composite and the Russell 2000 gained 0.8%.

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Retail stocks were the day’s leaders with the S&P Retail Index rising 1.2% to lift the entire consumer discretionary sector. Macy’s Inc. (NYSE:M) gained 2.7%, J C Penney Company Inc (NYSE:JCP) gained 2.3%, and Sears Holdings Corp (NASDAQ:SHLD) gained 2.6%.

Oil pulled back after a recent rally, dragging energy stocks down to a 1% loss. Crude oil fell 5.7% to close at $50.92 on concerns over inventory accumulations.

The Federal Reserve was in focus after the release of the latest policy minutes. Officials remained split on the timing of rate liftoff with some favoring June, others wanting later, and two looking for a 2016 move. Concerns justifying last month’s surprise halving of the number of rate hikes the Fed expects this year from four to two included low inflation, the impact of the stronger dollar, and a lack of significant wage growth.

We’ve yet to see the Fed respond to the weak March jobs report, so traders were largely dismissive of the minutes.

Capital Economics’ Paul Ashworth highlights that the Fed has stated it needs to be “reasonably confident” that inflation will return to its 2% target over the medium term before acting on rates; but the minutes admit “there is no simple criteria for such a judgment.”

If job growth and wages accelerate in April and May, then the Fed’s language is sure to shift back towards an earlier rate hike window — something that will surely result in a market reaction as the liftoff date approaches. Stay tuned.

Finally, Alcoa Inc (NYSE:AA) kicked off the 1Q15 earnings season — sure to be closely watched for insight into the impact the strong dollar and weak energy prices will have on profitability — by reporting mixed results. Earnings of 28 cents per share beat the consensus estimate of 26 cents. But revenues of $5.8 billion were below the $5.9 billion analysts are looking for.

The company sounded an optimistic note, sticking to its projection of roughly 3.5 million metric tons of new aluminum demand growth this year — a 6.5% increase — to a record 57.5 million metric tons. Much of this is due to the growth of global aerospace and automotive sales.

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Emerging market stocks have been moving higher in a big way on expectations of new stimulus measures out of China and Japan amid weak economic data. China’s Shanghai Composite is up by nearly a third since February. That’s helping the Vanguard FTSE All-World ex-US ETF (NYSEARCA:VEU) recommended to Edge subscribers break up and out of an overhead resistance channel going back to October.

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

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