Stocks Fell After Hitting New Highs Last Week

Adam Sarhan |

After all was said and done, underneath the surface, it wasn't a pretty week on Wall Street. On Monday, the benchmark S&P 500 hit a new high for the year, then turned lower after several key areas of the market began to fall out of bed. Social media stocks were smacked hard last week after several key companies lowered guidance. The Fed met last week but didn't say much as they removed all calender references from their after market commentary and remain data-dependent. So far, the data remains lackluster at best which lowers the odds of a rate hike in the near future. The big winners (so far) from earnings season include: Amazon.com (AMZN), Netflix (NFLX), Hasbro (HAS), Domino’s Pizza (DPZ), Sketchers (SKX), Dunkin (DNKN), Microsoft Corp (MSFT), O’Reilly Automotive (ORLY), and YUM Brands (YUM), Skywest (SKYW), Web.com (WWWW), Equinix (EQIX), Styngenta (SYT), Nutri System (NTRI), Brink's Co (BCO), Teradyne Inc (TER), Skyworks Solutions (SWKS), and GoPro (GPRO)

On the downside: Twitter (TWTR), Yelp (YELP), LinkedIn (LNKD), Constant Contact (CTCT), Accuray (ARAY), Cooper Tire & Rubber (CTB), Abaxis (ABAX), Texas Instruments (TXN), Buffalo Wild Wings (BWLD), Baidu Inc. (BIDU), Stratasys (SSYS), Harman (HAR), Nokia (NOK), Travelers (TRV), 3M (MMM), Chipotle (CMG), Pulte Group ($PHM), Biogen Inc (BIIB), Generac Holdings (GNRC), First Solar (FSLR) and American Express (AXP), just to name a few. We mention this because history shows us that some of the market's strongest performers occur from big gaps up on earnings and some of the weakest stocks gap down after reporting numbers. Even though we saw some distribution (selling) last week, it is important to note that on Monday, the major averages hit new highs (record highs and 2000 highs for the Nasdaq), and the broader trend remains higher - for now. In the short term, the long range-bound action we have seen most of the year remains in place. 



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Monday-Wednesday's Action: Earnings Continue To Be Released

On Monday, stocks fell after a slew of biotechs got hammered. The benchmark S&P 500 hit a fresh record high on Monday but then turned lower which is not an ideal sign. The biotechs have been one of the strongest areas in the market over the past few years and continues to be a good proxy for the broader risk appetite from institutional investors. Therefore, that area must be watched closely. Once again, China's Shanghai Composite led other global stock markets and soared +3.0% after reports spread that the People's Bank of China (China's Central Bank) was looking into buying local government bonds (Their latest attempt to boost markets). In Europe, optimism spread regarding the ongoing Greek drama. On the upside, steel and gold stocks rallied nicely as they bounce off a near term low. The Market Vectors Gold Miners ETF  (GDX) and Market Vectors Steel ETF  (SLX) rallied +2.1% and +0.8%, respectively. After Monday's close, Apple Inc (AAPL) reported another very strong quarter with iPhone sales as the standout winner.

Stocks ended mixed on Tuesday after another see-saw session on Wall Street. Investors digested the latest round of economic and earnings data and waited for the Fed. The iShares Nasdaq Biotechnology (IBB) (popular biotech ETF) broke below its 50 DMA line for the first time since February. Almost instantly, the bulls showed up and did their best to defend support. The buying helped intra-day but by the close the IBB closed below its 50 DMA line on monstrous volume. Twitter Inc. (TWTR) plunged 18% on Tuesday after their earnings were leaked intra-day. The stock was briefly halted an hour before the close and then reopened down 20%. Twitter was scheduled to release their earnings after the bell but they posted their results on their website during the day and a data mining company tweeted (which is ironic) the results which sent the stock plunging. The company said they do not manage their investor relations page and the company is looking into who leaked the results. Economic data was mixed: the Cash Shiller 20-City Home Price Index rose by +5% in February, beating estimates of +4.7%. The Conference Board's Consumer Confidence Index slid to 95.2 in April, missing estimates for 102.2.

Before Wednesday's open, the government reported Q1 GDP rose by 0.2%, missing estimates for a 1% gain. It was also much lower than Q4 2014's reading of 2.2%. The weaker-than-expected reading sent the USD and U.S. Bonds plunging as pressure eased regarding an imminent rate hike from the Fed. The euro surged on the news and broke out of resistance of a two month base which sent the German Dax (Germany's stock market) and several other European equity markets lower. At 2pm EST, the Fed concluded its latest 2-day meeting and left rates steady near zero percent, expressed concern over the economy, and said they remain "data-dependent." In other news, p ending home sales rose 1.1% in March which was the fastest increase since last summer and beat estimates for a gain of 1.0%.

Thursday-Friday’s Action: Biotechs Break 50 DMA

Stocks fell hard on Thursday on the last trading day of April. Biotech stocks dragged the market lower but the selling was broad in nature. Economic data remained mixed. First, weekly jobless claims slid to the lowest level since April 2000. Claims fell to 262k, beating estimates for 290k. The Chicago PMI rose to 52.3 in April, beating estimates for a gain of 50. Personal income growth was flat in March, missing estimates for +0.2% gain and missed February's 0.4% reading. Personal income fell to the lowest level since December 2013 which bodes poorly for consumer spending and the broader economy. The employment cost index rose 0.7% in Q1 2015, beating estimates for 0.6% gain. Stocks bounced on Friday on the first trading day of May. Earnings data was mixed: The ISM Manufacturing index came in at 51.5, missing estimates for 52. Construction fell -0.6%, missing estimates for 0.4%. Consumer sentiment came in at 95.9, almost matching estimates for 96. Finally, the PMI manufacturing index fell to 54.1, missing estimates for 54.5.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. Want specific buy and sell signals in leading stocks? Join FindLeadingStocks.com and a professional watchlist, model portfolio, leading stocks, and a lot more.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
MMM 3M Company 236.67 1.80 0.77 2,221,752 Trade
CMG Chipotle Mexican Grill Inc. 305.63 18.98 6.62 2,742,393 Trade
EQIX Equinix Inc. 403.30 -4.01 -0.98 1,317,029 Trade
TER Teradyne Inc. 43.31 -0.15 -0.35 2,213,821 Trade
GPRO GoPro Inc. 5.49 -0.13 -2.31 3,643,552 Trade
BIDU Baidu Inc. 244.72 -3.48 -1.40 2,198,729 Trade
YELP Yelp Inc. Class A 41.73 -0.24 -0.57 1,273,628 Trade
CTCT Constant Contact Inc. n/a n/a n/a 0 Trade
NTRI NutriSystem Inc 42.60 0.25 0.59 351,186 Trade
TRV The Travelers Companies Inc. 141.16 0.28 0.20 1,923,925 Trade
SYT Syngenta AG n/a n/a n/a 0 Trade
AAPL Apple Inc. 172.43 -0.56 -0.32 40,176,091 Trade
DPZ Domino\'s Pizza Inc 220.74 3.04 1.40 1,397,075 Trade
SSYS Stratasys Ltd. 21.03 -0.14 -0.66 354,585 Trade
ORLY O Reilly Automotive Inc. 251.10 -1.19 -0.47 726,765 Trade
AXP American Express Company 96.79 0.23 0.24 3,280,686 Trade
TWTR Twitter Inc. 33.06 -0.55 -1.64 27,900,974 Trade
TXN Texas Instruments Incorporated 104.47 -0.10 -0.10 4,910,360 Trade
BWLD Buffalo Wild Wings Inc. n/a n/a n/a 0 Trade
AMZN Amazon.com Inc. 1,448.69 -13.07 -0.89 4,472,564 Trade
SKX Skechers U.S.A. Inc. 39.19 -0.28 -0.71 2,557,320 Trade
DNKN Dunkin\' Brands Group Inc. 62.64 -1.24 -1.94 1,352,697 Trade
YUM Yum! Brands Inc. 78.25 -0.72 -0.91 2,688,922 Trade
LNKD LinkedIn Corporation Class A n/a n/a n/a 0 Trade
NOK Nokia Corporation Sponsored American Depositary Sh 5.76 0.03 0.52 19,577,342 Trade
ABAX ABAXIS Inc. 69.06 0.05 0.07 125,234 Trade
CTB Cooper Tire & Rubber Company 35.60 -0.85 -2.33 891,393 Trade
SKYW SkyWest Inc. 56.60 -1.20 -2.08 154,040 Trade
FSLR First Solar Inc. 65.85 0.03 0.05 1,192,131 Trade
BIIB Biogen Inc. 291.87 -7.51 -2.51 2,943,057 Trade
PHM PulteGroup Inc. 29.74 0.24 0.81 4,990,056 Trade
ARAY Accuray Incorporated 5.25 0.00 0.00 350,460 Trade
NFLX Netflix Inc. 278.52 -1.75 -0.62 8,312,380 Trade
SWKS Skyworks Solutions Inc. 104.11 -0.26 -0.24 2,089,566 Trade
GNRC Generac Holdlings Inc. 45.69 -0.06 -0.13 265,406 Trade
HAS Hasbro Inc. 98.85 1.49 1.53 2,570,355 Trade
HAR Harman International Industries Incorporated n/a n/a n/a 0 Trade
MSFT Microsoft Corporation 92.00 -0.66 -0.71 30,596,919 Trade
WWWW Web.com Group Inc. n/a n/a n/a 0

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