Weekly Market Summary: Riding Wave of Momentum Into Earnings Season

The S&P 500 snapped an eight-session winning streak on Tuesday, but U.S. stocks still have strong momentum heading into the first-quarter earnings season.

The index flirted with the 2,900 level this week, which is a price that we haven’t seen since last October. One big change since then is that average U.S. earnings showed 20%-plus year-over-year growth in the first three quarters of 2018 and now we’re staring at the first quarterly earnings decline in the S&P 500 in three years.

The quarterly reports we’ll see over the next few weeks will go a long way to determining if the recent momentum can continue.

Economic Data Pleases Bulls

In the meantime, Brexit is one potential headwind for global stocks that seems to be off the table for the time being. The EU suggested on Wednesday that U.K. legislators delay a decision on how and when to leave the economic group until Oct. 31.

Elsewhere, trade talks between the U.S. and China continued to progress, but without a definitive resolution. On Friday, China reported that March exports increased 14%, doubling expectations.

Back at home, bulls were encouraged by the weekly jobless claims report on Thursday. The print of 196,000 marked the lowest weekly reading since 1969. Earlier in the week, core prices for both consumers and producers showed slower growth in March than in February, which helps support the Fed’s recent pause in interest rate hikes.

Next week will be relatively quiet on the economic front. As a reminder, U.S. markets will be closed on April 19, for the Good Friday holiday.

Anadarko Acquired Ahead of Earnings Kickoff

Anadarko Petroleum (APC) was a bigger winner this week, after receiving a $33 billion takeover bid from Chevron (CVX). Investors will receive a mix of cash and stock valued at $65 a share, representing a 37% premium.

On the other hand, Bed Bath and Beyond (BBBY) was a large earnings-related decliner, falling nearly 9% a day after disappointing investors with its results.

JP Morgan Chase (JPM) and Wells Fargo (WFC) kicked off earnings season on Friday and reporting activity will start to pick up next week.  Here’s a list of notable names scheduled to post quarterly results:

As the following chart shows, the S&P 500 has already gained 15% year-to-date… but facing the first quarterly earnings decline in three years, should you put new money to work in recent winners (Technology), or buy the laggards (Healthcare)?

Source: Bespoke Investment Group

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