Weekly Market Summary: Riding Wave of Momentum Into Earnings Season

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:

Date Company Exp. EPS
4/15 Citigroup (C) $1.79
4/16 Bank of America (BAC) $0.66
4/16 IBM (IBM) $2.24
4/16 Johnson & Johnson (JNJ) $2.06
4/16 Netflix (NFLX) $0.57
4/16 UnitedHealth (UNH) $3.60
4/17 PepsiCo (PEP) $0.93

 

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

If you’re nearing retirement or already retired, all you really care about is generating consistent income and protecting your hard-earned nest egg– not whether a company misses earnings expectations by a few pennies, or how and when Brexit may play out.

The good news is: there’s a better way. My colleague Brett Owens has created an “8% No-Withdrawal Portfolio” that generates steady income and impressive capital gains.

Thanks to his work, you no longer have to settle for low bond yields, or stocks like Bed Bath and Beyond that can lose more in one day than it pays in two years of dividends.

Wall Street has tried to address this issue with structured products, such as single premium immediate annuities (SPIAs). But just like the casinos don’t pay for all the glitz and glamour because gamblers usually win, the big financial service firms charge hefty fees to provide you with that steady income.

Instead, Brett’s system could hand you $40,000 a year on every $500,000 invested (in an up market or down one) with under-appreciated income plays like:

  • Closed-End Funds (CEFs)– We’ll share our top three CEF picks with you, each of which pay a monthly dividend. Many of these trade at a discount to net asset value.
  • Preferred Stocks– Brett lets you know two of the best active managers in this space to invest alongside with.
  • Recession-Proof REITs– discover two REITs that will grow above trend in any interest rate environment.

That’s 7 contrarian investment picks just to get started. Click here for instant access to the full 8%, No-Withdrawal portfolio.

Categories